Suppose the government of New Country has fixed the value of its currency, the New Peso, at $1 per New Peso, but the market equilibrium value of the New Peso is $0.50 per New Peso. In order to maintain the official value of the New Peso the Central Bank of New Country must either ________ domestic interest rates, or ________the supply of international reserves by purchasing New Pesos

A. lower; decrease
B. raise; decrease
C. raise; increase
D. lower; increase


Answer: B

Economics

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