Suppose that the country is on a fixed exchange rate and the
government is forced to sell foreign currency out of its official
reserves in return for domestic currency to keep the domestic
currency from devaluing in the international market. Taken by
itself, this action will
1. reduce the stock of money.
2. reduce the stock of base money.
3. reduce the stocks of both money and base
money.
4. reduce the money multiplier.
Choose the correct option.