the economics of money, banking, and financial markets

589 #

© 2014 Pearson Canada Inc.#

29. 
    

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

    
    


30. 
    

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

    
    


31. 
    

    Suppose that the European Central Bank 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: A
    Diff: 3 Type: MC Page Ref: 480
    Skill: Applied
    Objective List: 19.4 Understand the factors that change the exchange rate

    
    


32. 
    

    Suppose that the European Central Bank conducts a main refinancing sale. Everything else
    held constant, this would 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: D
    Diff: 3 Type: MC Page Ref: 480
    Skill: Applied
    Objective List: 19.4 Understand the factors that change the exchange rate