If the currency substitution approach is true,then a change to domestic money supply that causes currency depreciation could mean:
A) Further depreciation as individuals switch the substitute currency.
B) Central banks must intervene to maintain the fixed exchange rate of substitute currencies.
C) The decline in money supply will offset any depreciation.
D) The increase in money supply will cause further depreciation.

Question

Quizplus · Accepted Answer

If the currency substitution approach is true, individuals may switch to substitute currencies if there is a change to the domestic money supply that causes currency depreciation. This would result in further depreciation.

If the Currency Substitution Approach Is True,then a Change to Domestic