To maintain the peg, a nation must keep its circulating money supply constant. What factor(s) (in addition to its own actions) might result in a change in the money supply?
A) a change in the demand for money produced by an output shock or a change in foreign rates of interest
B) an increase in the trade gap
C) the issuance of new government bonds by the nation's government
D) a crackdown on money laundering activities by multinational corporations

Question

Quizplus · Accepted Answer

Changes in the demand for money can result from output shocks or changes in foreign rates of interest, which can lead to changes in the money supply. This can be difficult for a nation to control, as it is largely dependent on external factors. The other options listed may also have an impact on the economy, but they do not necessarily result in a change in the money supply.

To Maintain the Peg, a Nation Must Keep Its Circulating