631 #
© 2014 Pearson Canada Inc.#
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
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
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