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Question
Figure 13.2
Refer to Figure 13.2. In a fixed exchange rate regime, if an economy is experiencing external disequilibrium at point B, then to peg the exchange rate the central bank has to:
a. buy domestic currency, sell foreign currency, and shift the IS to the left.
b. buy foreign currency, sell domestic currency, and shift the LM to the right.
c. buy domestic currency, sell foreign currency, and shift the LM to the left.
d. buy foreign currency, sell domestic currency, and shift the IS to the right.
Answer
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