the economics of money, banking, and financial markets

631 #

© 2014 Pearson Canada Inc.#

11. 
    

    If a central bank does not want to allow the domestic currency to depreciate, it will ____
    international reserves by purchasing its currency, thereby ____ the monetary base and
    increasing the risk of higher unemployment.
    A) lose; decreasing
    B) lose; increasing
    C) acquire; decreasing
    D) acquire; increasing
    Answer: A
    Diff: 1 Type: MC Page Ref: 513
    Skill: Applied
    Objective List: 20.2 Discuss international financial transactions and the balance of payments

    
    


12. 
    

    A central bank's attempt to prevent an appreciation of its currency can stimulate domestic
    inflation if the ____ of its currency leads to ____ international reserves which
    ____ the monetary base.
    A) purchase; higher; increases
    B) purchase; lower; decreases
    C) sale; lower; decreases
    D) sale; higher; increases
    Answer: D
    Diff: 2 Type: MC Page Ref: 513
    Skill: Applied
    Objective List: 20.2 Discuss international financial transactions and the balance of payments

    
    


13. 
    

    A central bank's attempt to prevent an appreciation of its currency can stimulate domestic
    inflation if the ____ of foreign currencies leads to ____ international reserves which
    ____ the monetary base.
    A) purchase; higher; increases
    B) purchase; lower; decreases
    C) sale; lower; decreases
    D) sale; higher; increases
    Answer: A
    Diff: 2 Type: MC Page Ref: 513
    Skill: Applied
    Objective List: 20.2 Discuss international financial transactions and the balance of payments