How would a country offset the effects of reduced government spending (assume fixed exchange rates and low international capital mobility)?
a. The central bank would sell securities in the open market.
b. The central bank would buy securities in the open market.
c. The central bank would buy domestic currency in the foreign exchange market.
d. The central bank would raise the discount rate.
Question 2
Cashing out capital gains in Virtual Currency System 3 (i.e., turning virtual capital gains into real world currencies) causes the nation's:
a. Monetary base to fall.
b. M2 money supply to fall.
c. M2 money multiplier to remain the same.
d. M2 money supply to rise.
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