the economics of money, banking, and financial markets

(Sean Pound) #1
601 #
© 2014 Pearson Canada Inc.#



  1. Suppose that the Bank of Japan buys yen-denominated assets with Canadian dollar assets.
    Everything else held constant, this transaction will cause ____ in the foreign assets held by
    the Bank of Canada and ____ in the Canadian monetary base.
    A) an increase; an increase
    B) an increase; a decrease
    C) a decrease; an increase
    D) a decrease; a decrease
    Answer: D
    Diff: 1 Type: MC Page Ref: 493
    Skill: Applied
    Objective List: 20.1 Describe central bank intervention in the foreign exchange market and its
    effects on the money supply and the exchange rate




  2. When the central bank allows the purchase or sale of domestic currency to have an effect on
    the monetary base, it is called ____.
    A) an unsterilized foreign exchange intervention
    B) a sterilized foreign exchange intervention
    C) an exchange rate feedback rule
    D) a money neutral foreign exchange intervention
    Answer: A
    Diff: 1 Type: MC Page Ref: 494
    Skill: Recall
    Objective List: 20.1 Describe central bank intervention in the foreign exchange market and its
    effects on the money supply and the exchange rate




  3. A foreign exchange intervention with an offsetting open market operation that leaves the
    monetary base unchanged is called ____.
    A) an unsterilized foreign exchange intervention
    B) a sterilized foreign exchange intervention
    C) an exchange rate feedback rule
    D) a money neutral foreign exchange intervention
    Answer: B
    Diff: 1 Type: MC Page Ref: 495 - 496
    Skill: Recall
    Objective List: 20.1 Describe central bank intervention in the foreign exchange market and its
    effects on the money supply and the exchange rate



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