the economics of money, banking, and financial markets

586 #

© 2014 Pearson Canada Inc.#

17. 
    

    Suppose that the Bank of Canada enacts expansionary policy. Everything else held constant,
    this will cause the demand for Canadian assets to ____ and the Canadian dollar to
    ____.
    A) increase; appreciate
    B) decrease; appreciate
    C) increase; depreciate
    D) decrease; depreciate
    Answer: D
    Diff: 3 Type: MC Page Ref: 479
    Skill: Applied
    Objective List: 19.4 Understand the factors that change the exchange rate

    
    


18. 
    

    Suppose that the Bank of Canada sells bonds to the chartered banks. Everything else held
    constant, this will cause the demand for Canadian assets to ____ and the Canadian dollar
    will ____.
    A) increase; appreciate
    B) increase; depreciate
    C) decrease; appreciate
    D) decrease; depreciate
    Answer: A
    Diff: 3 Type: MC Page Ref: 479
    Skill: Recall
    Objective List: 19.4 Understand the factors that change the exchange rate

    
    


19. 
    

    An increase in the foreign interest rate causes the demand for domestic assets to ____
    and the domestic currency to ____, everything else held constant.
    A) increase; appreciate
    B) increase; depreciate
    C) decrease; appreciate
    D) decrease; depreciate
    Answer: D
    Diff: 1 Type: MC Page Ref: 480
    Skill: Recall
    Objective List: 19.4 Understand the factors that change the exchange rate

    
    


20. 
    

    An increase in the foreign interest rate causes the demand for domestic assets to shift to the
    ____ and the domestic currency to ____, everything else held constant.
    A) right; appreciate
    B) right; depreciate
    C) left; appreciate
    D) left; depreciate
    Answer: D
    Diff: 1 Type: MC Page Ref: 480
    Skill: Recall
    Objective List: 19.4 Understand the factors that change the exchange rate