Question 1

Which one of the following statements is the most correct?

Accepted Answer

A)  If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank's foreign assets implies an increased home money supply. 
B)  If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank's foreign assets implies a decreased home money supply. 
C)  If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank's foreign assets implies an increased home money demand. 
D)  If central banks are not sterilizing and the home country has a balance of payments surplus, any associated decrease in the home central bank's foreign assets implies an increased home money supply. 
E)  If central banks are not sterilizing and the home country has a balance of payments shortage, any associated decrease in the home central bank's foreign assets implies an increased home money supply. 
A)  If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank's foreign assets implies an increased home money supply. 
B)  If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank's foreign assets implies a decreased home money supply. 
C)  If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank's foreign assets implies an increased home money demand. 
D)  If central banks are not sterilizing and the home country has a balance of payments surplus, any associated decrease in the home central bank's foreign assets implies an increased home money supply. 
E)  If central banks are not sterilizing and the home country has a balance of payments shortage, any associated decrease in the home central bank's foreign assets implies an increased home money supply.

Question 2

Assuming perfect asset substitutability, can sterilized intervention by the central bank be effective?
 Please discuss.

Accepted Answer

No, a sterilized foreign exchange interv

Question 3

Why is it important to understand fixed exchange rates in the modern global economy?

Accepted Answer

Fixed rates continue to be important for

Question 4

Under fixed exchange rates, which one of the following statements is the MOST accurate?

Accepted Answer

A)  Devaluation causes a reduction of the money supply. 
B)  Devaluation has no effect on the stock of money. 
C)  Devaluation causes an expansion of the money supply. 
D)  Devaluation causes a reduction in output. 
E)  Devaluation causes a reduction in official reserves. 
A)  Devaluation causes a reduction of the money supply. 
B)  Devaluation has no effect on the stock of money. 
C)  Devaluation causes an expansion of the money supply. 
D)  Devaluation causes a reduction in output. 
E)  Devaluation causes a reduction in official reserves.

Question 5

Which one of the following statements is the MOST accurate?

Accepted Answer

A)  Under a fixed exchange rate, central bank monetary tools are powerless to affect the economy's money supply. 
B)  Under a flexible exchange rate, central bank monetary tools are powerless to affect the economy's money supply or its output. 
C)  Under a fixed exchange rate, fiscal policy tools are powerless to affect the economy's money supply or its output. 
D)  Under a fixed exchange rate, central bank monetary tools are powerless to affect the economy's money supply or its output. 
E)  Under a dirty float exchange rate, central bank monetary tools are powerless to affect the economy's money supply or its output. 
A)  Under a fixed exchange rate, central bank monetary tools are powerless to affect the economy's money supply. 
B)  Under a flexible exchange rate, central bank monetary tools are powerless to affect the economy's money supply or its output. 
C)  Under a fixed exchange rate, fiscal policy tools are powerless to affect the economy's money supply or its output. 
D)  Under a fixed exchange rate, central bank monetary tools are powerless to affect the economy's money supply or its output. 
E)  Under a dirty float exchange rate, central bank monetary tools are powerless to affect the economy's money supply or its output.

Question 6

Briefly discuss the main advantage of the bimetallic standard over the gold standard.

Accepted Answer

The advantage of bimetallism was that it

Question 7

The liabilities side of a central bank's accounts consists of

Accepted Answer

A)  deposits held by private banks. 
B)  currency in circulation. 
C)  deposits held by private banks and currency in circulation. 
D)  deposits held by foreign banks, domestic assets, and currency in circulation. 
E)  foreign assets and domestic assets. 
A)  deposits held by private banks. 
B)  currency in circulation. 
C)  deposits held by private banks and currency in circulation. 
D)  deposits held by foreign banks, domestic assets, and currency in circulation. 
E)  foreign assets and domestic assets.

Question 8

Under fixed exchange rates, which one of the following statements is the MOST accurate?

Accepted Answer

A)  Devaluation causes a decrease in output, a decrease in official reserves, and a contraction of the money supply. 
B)  Devaluation causes a rise in output, a rise in official reserves, and an expansion of the money supply. 
C)  Devaluation causes a rise in output and a rise in official reserves. 
D)  Devaluation causes a rise in output and an expansion of the money supply. 
E)  Devaluation causes a rise in official reserves, and an expansion of the money supply. 
A)  Devaluation causes a decrease in output, a decrease in official reserves, and a contraction of the money supply. 
B)  Devaluation causes a rise in output, a rise in official reserves, and an expansion of the money supply. 
C)  Devaluation causes a rise in output and a rise in official reserves. 
D)  Devaluation causes a rise in output and an expansion of the money supply. 
E)  Devaluation causes a rise in official reserves, and an expansion of the money supply.

Question 9

This question concerns the mechanism of a reserve currency standard.
Two countries, X and Y, have two currencies, x and y, fixed to the reserve currency, the U.S. dollar. Suppose the exchange rate between x and the U.S. dollar is 3x per dollar. Suppose the exchange rate between y and the U.S. dollar is 5y per dollar. Explain (using numbers) the mechanism if the x-y exchange rate was 0.8 x per y.

Accepted Answer

At this exchange rate, an investor can m

Question 10

Which of the following best describes a deliberate government decision to lower the exchange rate, E?

Accepted Answer

A)  appreciation 
B)  depreciation 
C)  revaluation 
D)  devaluation 
E)  accumulation 
A)  appreciation 
B)  depreciation 
C)  revaluation 
D)  devaluation 
E)  accumulation

Question 11

A balance sheet for the central bank of Pecunia is shown below:
Central Bank Balance Sheet
AssetsLiabilities
Foreign assets $1,000Deposits held by private banks $500
Domestic assets $1,500Currency in circulation$2,000
Please write the new balance sheet if the bank purchased $100 in foreign bonds by writing a check on itself.

Accepted Answer

Central Bank Balance Sheet
Ass

Question 12

Currency crises may result from

Accepted Answer

A)  central bank balance sheets with higher liabilities than assets. 
B)  political upheaval leading to lowering exports. 
C)  a reconfiguration of central bank balance sheets. 
D)  speculative attacks on the currency or central banks purchasing excessive amounts of government bonds. 
E)  depreciation of foreign reserves. 
A)  central bank balance sheets with higher liabilities than assets. 
B)  political upheaval leading to lowering exports. 
C)  a reconfiguration of central bank balance sheets. 
D)  speculative attacks on the currency or central banks purchasing excessive amounts of government bonds. 
E)  depreciation of foreign reserves.

Which one of the following statements is the most correct?

Assuming perfect asset substitutability, can sterilized intervention by the central bank be effective? Please discuss.

Why is it important to understand fixed exchange rates in the modern global economy?

Under fixed exchange rates, which one of the following statements is the MOST accurate?

Which one of the following statements is the MOST accurate?

Briefly discuss the main advantage of the bimetallic standard over the gold standard.

The liabilities side of a central bank's accounts consists of

Under fixed exchange rates, which one of the following statements is the MOST accurate?

Which of the following best describes a deliberate government decision to lower the exchange rate, E?

Currency crises may result from

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Exam 18: Fixed Exchange Rates and Foreign Exchange Intervention

Which one of the following statements is the most correct?

Assuming perfect asset substitutability, can sterilized intervention by the central bank be effective? Please discuss.

Why is it important to understand fixed exchange rates in the modern global economy?

Under fixed exchange rates, which one of the following statements is the MOST accurate?

Which one of the following statements is the MOST accurate?

Briefly discuss the main advantage of the bimetallic standard over the gold standard.

The liabilities side of a central bank's accounts consists of

Under fixed exchange rates, which one of the following statements is the MOST accurate?

Which of the following best describes a deliberate government decision to lower the exchange rate, E?

Currency crises may result from

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters