Under a fixed exchange rate system, at low domestic real interest rates the demand for domestic currency ________, so the central bank ________ foreign-exchange reserves.
A) increases; acquires
B) increases; loses
C) decreases; acquires
D) decreases; loses
Question 2
The real interest rate can be thought of as
A) the price of current consumption relative to future consumption.
B) the price of current consumption completely smoothed over a lifetime.
C) the price of future consumption smoothed completely over a lifetime.
D) the price of current consumption divided by the price of current saving.
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