Exam 18: Fixed Exchange Rates and Foreign Exchange Intervention

A balance sheet for the central bank of Pecunia is shown below: Central Bank Balance Sheet Assets Liabilities Foreign assets $1,000 Deposits held by private banks $500 Domestic assets $1,500 Currency in circulation $2,000 Please write the new balance sheet if the bank sells $100 worth of foreign bonds for domestic currency.

Which one of the following statements is the MOST accurate?

Use a figure to illustrate the ineffectiveness of monetary policy to spur on an economy under a fixed exchange rate.

A central bank's international reserves consists of its holdings of

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

Which one of the following statements is the MOST accurate?

What is the expected dollar rate of return on dollar deposits if today's exchange rate is $1.10 per euro,next year's expected exchange rate is $1.165 per euro,the dollar interest rate is 10%,and the euro interest rate is 5%?

Describe the effect of the 2008-2009 global financial crisis on the Swiss franc and the central bank's efforts to respond to the resulting problems.

Please define and give an example of sterilized foreign exchange intervention.

Define devaluation and use a figure to show the effect of a currency devaluation on the economy.

Under fixed exchange rate,in general which one of the following statements is the MOST accurate?

From 1837 and up until the Civil War,the United States adhered to a

If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant,can it still keep the exchange rate fixed at ? Please explain with the aid of a figure.

Central banks often intervene in currency markets.This activity is called

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

If assets are imperfect substitutes,then an increase in the amount of domestic currency bonds held by the public will ________ the risk premium and ________ the amount of domestic currency bonds held by the central bank.

Which one of the following statements is the MOST accurate?

The global financial crisis of 2007-2008 resulted in a(n)________ of the Swiss franc as foreign currency flowed ________ the country.As result,Swiss products became ________ competitive in world markets.

Capital flight

Fiscal expansion under fixed exchange rates will have what temporary effect?