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© 2014 Pearson Canada Inc.#
If a central bank does not want to see its currency ____ in value, it may pursue
contractionary monetary policy to raise the domestic interest rate, thereby ____ its currency.
A) fall; strengthening
B) fall; weakening
C) rise; strengthening
D) rise; weakening
Answer: A
Diff: 1 Type: MC Page Ref: 513
Skill: Recall
Objective List: 20.2 Discuss international financial transactions and the balance of payments
If a central bank does not want to see its currency rise in value, it may pursue ____
monetary policy to ____ the domestic interest rate, thereby weakening its currency.
A) expansionary; raise
B) contractionary; raise
C) expansionary; lower
D) contractionary; lower
Answer: C
Diff: 1 Type: MC Page Ref: 513
Skill: Recall
Objective List: 20.2 Discuss international financial transactions and the balance of payments
If a central bank does not want to see its currency ____ in value, it may pursue
expansionary monetary policy to lower the domestic interest rate, thereby ____ its currency.
A) fall; strengthening
B) fall; weakening
C) rise; strengthening
D) rise; weakening
Answer: D
Diff: 1 Type: MC Page Ref: 513
Skill: Recall
Objective List: 20.2 Discuss international financial transactions and the balance of payments
If a central bank does not want to allow the domestic currency to appreciate, it will ____
international reserves by selling its currency, thereby ____ the monetary base and
increasing the risk of higher inflation.
A) lose; decreasing
B) lose; increasing
C) acquire; decreasing
D) acquire; increasing
Answer: D
Diff: 1 Type: MC Page Ref: 513
Skill: Applied
Objective List: 20.2 Discuss international financial transactions and the balance of payments