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Denmark has a fixed exchange rate, where the currency (Danish Krona) is pegged to the Euro. Denmark conducts the pegging by use of monetary policy:
Denmark has a fixed exchange rate, where the currency (Danish Krona) is pegged to the Euro. Denmark conducts the pegging by use of monetary policy: They keep the value of the Danish Krona relative to the Euro stable by trading the Danish Krona against the Euro. If the Danish Krone (DKK) depreciates relative 10 the Euro (EUR) in the foreign exchange market (FXM), how should the Danish central bank respond? a. Denmark's central bank increases the money supply by buying Euros against DKK b. Denmark's central bank decreases money supply by selling Euro against DKK c. Denmark's central bank sell the US$ and does not trade Euro d. Denmark's central bank does not intervene
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