Consider that Britain is trying to maintain a fixed exchange rate with respect to the U.S. dollar. However, the present situation in the foreign exchange market is conducive for the British pound to depreciate with respect to the U.S. dollar. If the British government uses unsterilized intervention in the foreign exchange market, then it is expected that
A. the British money supply will rise.
B. the British money supply will remain unchanged.
C. Britain is gaining official international reserves.
D. the British money supply will fall.
Answer: D
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