the economics of money, banking, and financial markets

612 #

© 2014 Pearson Canada Inc.#

13. 
    

    When the domestic currency is initially overvalued in a fixed exchange rate regime, the
    central bank must intervene in the foreign exchange market to ____ the domestic currency,
    thereby allowing the money supply to ____.
    A) purchase; decline
    B) sell; decline
    C) purchase; increase
    D) sell; increase
    Answer: A
    Diff: 2 Type: MC Page Ref: 526 - 528
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls

    
    


14. 
    

    When the domestic currency is initially undervalued in a fixed exchange rate regime, the
    central bank must intervene in the foreign exchange market to ____ the domestic currency,
    thereby allowing the money supply to ____.
    A) purchase; decline
    B) sell; decline
    C) purchase; increase
    D) sell; increase
    Answer: D
    Diff: 2 Type: MC Page Ref: 527 - 528
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls

    
    


15. 
    

    Under a fixed exchange rate regime, if a country has an overvalued exchange rate, then its
    central bank's attempt to keep its currency from ____ will result in a ____ of
    international reserves.
    A) depreciating; gain
    B) depreciating; loss
    C) appreciating; gain
    D) appreciating; loss
    Answer: B
    Diff: 2 Type: MC Page Ref: 527 - 528
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls