the economics of money, banking, and financial markets

(Sean Pound) #1
615 #
© 2014 Pearson Canada Inc.#



  1. A balance of payments ____ is associated with a loss of international reserves, while a
    balance of payments ____ is associated with a gain.
    A) surplus; surplus
    B) surplus; deficit
    C) deficit; surplus
    D) deficit; deficit
    Answer: C
    Diff: 2 Type: MC Page Ref: 527 - 528
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls




  2. Under a fixed exchange rate regime, if a central bank must intervene to purchase the
    ____ currency by selling ____ assets, then, like an open market sale, this action
    reduces the monetary base and the money supply, causing the interest rate on domestic assets to
    rise.
    A) domestic; foreign
    B) domestic; domestic
    C) foreign; foreign
    D) foreign; domestic
    Answer: A
    Diff: 3 Type: MC Page Ref: 500
    Skill: Applied
    Objective List: 20.3 Summarize the arguments for and against capital controls




  3. Under a fixed exchange rate regime, if a central bank must intervene to purchase the
    domestic currency by selling foreign assets, then, like an open market sale, this action ____
    the monetary base and the money supply, causing the interest rate on domestic assets to
    ____.
    A) increases; rise
    B) increases; fall
    C) reduces; rise
    D) reduces; fall
    Answer: C
    Diff: 3 Type: MC Page Ref: 500
    Skill: Applied
    Objective List: 20.3 Summarize the arguments for and against capital controls




  4. To keep from running out of international reserves under the Bretton Woods system, a
    country had to implement ____ monetary policy to ____ its currency.
    A) expansionary; strengthen
    B) expansionary; weaken
    C) contractionary; strengthen
    D) contractionary; weaken
    Answer: C
    Diff: 2 Type: MC Page Ref: 503
    Skill: Recall
    Objective List: 20.3 Summarize the arguments for and against capital controls



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