Under a fixed exchange rate system, the central bank of a country expe

Under a fixed exchange rate system, the central bank of a country experiencing a balance of payments deficit will:

A) increase the supply of the domestic currency to prevent currency depreciation.
B) increase the demand for the domestic currency to prevent currency depreciation.
C) increase the supply of domestic currency to prevent a currency appreciation.
D) increase the demand for domestic currency to prevent a currency appreciation.

ANSWER

B