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1 | |
With fixed exchange rates and no private capital flows, to correct a balance of payments deficit the central bank will _______ and ___________ |
|
| | A) | buy foreign exchange, sell domestic currency |
| | B) | sell foreign exchange, buy domestic currency |
| | C) | buy foreign exchange, buy domestic currency |
| | D) | sell foreign exchange, sell domestic currency |
|
2 | |
With fixed exchange rates and no private currency flows, when the central bank buys domestic currency the domestic money supply is _________ |
|
| | A) | increased |
| | B) | unaffected |
| | C) | reduced |
|
3 | |
When the central bank prints cash and buys domestic bonds to offset the contraction in domestic money supply resulting from an external payments deficit, this is an example of ________ |
|
| | A) | devaluation |
| | B) | revaluation |
| | C) | deflation |
| | D) | sterilisation |
|
4 | |
In the absence of international capital controls, central banks set ________ to provide the correct incentive for speculators |
|
| | A) | money supply targets |
| | B) | incomes policy |
| | C) | interest rates |
| | D) | inflation targets |
|
5 | |
A fixed exchange rate, plus perfect capital mobility ________ the scope for monetary policy |
|
| | A) | enhances |
| | B) | undermines |
| | C) | encourages |
| | D) | facilitates |
|
6 | |
The competitive advantage from a devaluation is likely to be offset by __________ and ____________ |
|
| | A) | higher import prices, higher wage increases |
| | B) | lower export prices, lower import volumes |
| | C) | higher import prices, lower export prices |
| | D) | higher wage increases, lower import volumes |
|
7 | |
Under floating exchange rates, expectations of higher interest rates are likely to cause an ___________ of the exchange rate |
|
| | A) | depreciation |
| | B) | appreciation |
| | C) | fall |
| | D) | devaluation |
|
8 | |
Fiscal policy is weak under floating exchange rates as fiscal expansion _____________ |
|
| | A) | crowds out imports |
| | B) | crowds out public consumption |
| | C) | crowds out exports |
| | D) | reduces the budget deficit |
|
9 | |
Unsterilised intervention in the forex market means that a balance of payments surplus results in a higher domestic money supply |
|
| | A) | TRUE |
| | B) | FALSE |
|
10 | |
Sterilised intervention works when there is perfect capital mobility because offsetting capital flows are immediately induced |
|
| | A) | TRUE |
| | B) | FALSE |
|
11 | |
Under floating exchange rates, monetary policy is a powerful tool |
|
| | A) | TRUE |
| | B) | FALSE |
|
12 | |
The main factor affecting the long run path of the UK nominal exchange rate is the growth of world trade |
|
| | A) | TRUE |
| | B) | FALSE |
2002 A McGraw-Hill Online Learning Centre