615 #
© 2014 Pearson Canada Inc.#
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
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
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
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