the economics of money, banking, and financial markets

611 #

© 2014 Pearson Canada Inc.#

9. 
   

   Under a fixed exchange rate regime, if the domestic currency is initially ____, that is,
   ____ par, the central bank must intervene to sell the domestic currency by purchasing
   foreign assets.
   A) overvalued; below
   B) overvalued; above
   C) undervalued; below
   D) undervalued; above
   Answer: D
   Diff: 2 Type: MC Page Ref: 500
   Skill: Recall
   Objective List: 20.3 Summarize the arguments for and against capital controls

   
   


10. 
    

    Under a fixed exchange rate regime, if the domestic currency is initially undervalued, that is,
    above par, the central bank must intervene to sell the ____ currency by purchasing
    ____ assets.
    A) domestic; foreign
    B) domestic; domestic
    C) foreign; foreign
    D) foreign; domestic
    Answer: A
    Diff: 2 Type: MC Page Ref: 500
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls

    
    


11. 
    

    Under a fixed exchange rate regime, if the domestic currency is initially ____, that is,
    ____ par, the central bank must intervene to purchase the domestic currency by selling
    foreign assets.
    A) overvalued; below
    B) overvalued; above
    C) undervalued; below
    D) undervalued; above
    Answer: A
    Diff: 2 Type: MC Page Ref: 500
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls

    
    


12. 
    

    Under a fixed exchange rate regime, if the domestic currency is initially overvalued, that is,
    below par, the central bank must intervene to purchase the ____ currency by selling
    ____ assets.
    A) domestic; foreign
    B) domestic; domestic
    C) foreign; foreign
    D) foreign; domestic
    Answer: A
    Diff: 2 Type: MC Page Ref: 500
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls