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Suppose the government of South Island has fixed the value of its currency, the Islandia, at $0.50 per Islandia, but the fundamental value of the
Suppose the government of South Island has fixed the value of its currency, the Islandia, at $0.50 per Islandia, but the fundamental value of the Islandia is $0.75 per Islandia. In order to maintain the official value of the Islandia the Central Bank of South Island must either _____ domestic interest rates or supply Islandia, which causes the supply of international reserves to ______. A. raise; increase B. raise; decrease C. raise; remain unchanged D. lower; increase
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