How A Central Bank Fixes the Exchange Rate?
Answer:The Central bank must always be willing to trade currencies at the fixed exchange rate with the private actors in the foreign exchange market to hold exchange rate constant....
What is the policy of sterilization? Give an example.
Answer:Sterilized foreign exchange intervention – policy by which central banks carry out equal foreign and domestic asset transactions in opposite directions to nullify the impac...
Explain why under fixed exchange rate, monetary policy
Explain why under fixed exchange rate, monetary policy is ineffective whereas under floating exchange rate it is effective in risingAnswer: Under floating, by purchasing domestic a...
use the same figure to study an expansionary monetary policy.
Use the fixed exchange rate DD – AA model to describe the economy’s short-run equilibrium. Then, use the same figure to study an expansionary monetary policy. Show that the polic...
Discuss the difference in the two regimes.
Under fixed exchange rate, show using a figure, the effects of an expansionary fiscal policy. Show the equilibrium under a flexible exchange rate. Discuss the difference in the t...
Using a figure, show how devaluation affects an economy
Answer: When a currency is devalued from E0 to E1, the equilibrium shifts from point 1 to 2. Both output and money supply increase. And international reserves increase.
what happens when Germany’s current account surplus
Under the price-specie-flow mechanism, what happens when Germany’s current account surplus is greater than its non-reserve financial account deficits?A.German loans will finance a...
The “rules of the game” under the gold standard
The “rules of the game” under the gold standard can best be described as which of the following?A.Selling domestic assets in a deficit and buying assets in a surplusB.Slowing dow...
By internal balance, most economists mean
A.only fullB.only priceC.full employment and priceD.full employment and moderate increase inE.None of theAnswer: C
By external balance, most economists mean
A.avoiding excessive imbalances in internationalB.a balance between exports andC.a balance between trade account and serviceD.a fixed exchangeE.None of theAnswer: A
External balance means
A.balance in the country’s currentB.balance in the country’s serviceC.balance in the country’s financialD.balance in the country’s tradeE.None of theAnswer: E
A current account surplus
A.poses a problem if domestic savings are being invested more profitably abroad than they would be atB.may pose no problem if domestic savings are being invested more profitably ab...
