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A central bank that buys foreign exchange to keep a fixed exchange rate unchanged: (a) Will see its foreign exchange reserves rise if it does

A central bank that buys foreign exchange to keep a fixed exchange rate unchanged: (a) Will see its foreign exchange reserves rise if it does nothing else. (b) Will see its foreign exchange reserves fall if it does nothing else. (c) Does not have to worry about the effects of its actions on the domestic money supply. (d) Can always offset any impact on the domestic money supply through open market sales of domestic assets.

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