11. Which of the following statements is correct if a country has adopted fixed exchange rateregime?
(A) If the currency is overvalued with respect to the fixed parity, the central bank has to intervenee.g. by increasing the interest rate.
(B) The central bank has to offiset the effects of capital outfow on the exchange rate e.g. bybuying domestic currency and paying with foreign reserves.
(C) If, in order to reduce excess supply of the domestic currency, the central bank buys domesticcurrency at the target exchange rate, this will necessarily cause infation in the home country.
(D) Measures taken by the central bank to keep the exchange rate fixed will not affect thedomestic interest rate.