602 #
© 2014 Pearson Canada Inc.#
Everything else held constant, if a central bank makes an unsterilized purchase of foreign
assets, then the domestic money supply will ____ and the domestic currency will ____.
A) increase; appreciate
B) increase; depreciate
C) decrease; appreciate
D) decrease; depreciate
Answer: B
Diff: 1 Type: MC Page Ref: 493
Skill: Recall
Objective List: 20.1 Describe central bank intervention in the foreign exchange market and its
effects on the money supply and the exchange rate
Everything else held constant, if a central bank makes an unsterilized ____ of foreign
assets, then the domestic money supply will increase and the domestic currency will ____.
A) purchase; appreciate
B) purchase; depreciate
C) sale; appreciate
D) sale; depreciate
Answer: B
Diff: 1 Type: MC Page Ref: 494 - 495
Skill: Recall
Objective List: 20.1 Describe central bank intervention in the foreign exchange market and its
effects on the money supply and the exchange rate
Everything else held constant, if a central bank makes an unsterilized ____ of foreign
assets, then the domestic money supply will ____ and the domestic currency will
appreciate.
A) purchase; increase
B) purchase; decrease
C) sale; increase
D) sale; decrease
Answer: D
Diff: 1 Type: MC Page Ref: 494 - 495
Skill: Recall
Objective List: 20.1 Describe central bank intervention in the foreign exchange market and its
effects on the money supply and the exchange rate