Assume that China maintains a currency peg to the U.S. dollar. If the peg was abandoned and the yuan - dollar exchange became a floating exchange rate, we can expect:
A
An increase in the rate of domestic economic growth in China.
B
An increase in U.S. interest rates as China reduces purchases of U.S. Treasury debt.
C
Europe would also abandon the peg of the euro to the dollar.
D
An appreciation of the dollar in relation to the yuan.
When the Federal Reserve uses open market operations (OMO) in an expansionary monetary policy:
A
The Fed will purchase stocks from banks, increasing the monetary base.
B
The Fed will decrease the discount rate, decreasing the monetary base.
C
The Fed will buy bonds from banks, increasing bank reserves and increasing the monetary base.
D
The Fed will lower taxes and increase government spending.
Assume that China maintains a currency peg to the U.S. dollar. If the peg was abandoned and the yuan - dollar exchange became a floating exchange rate, we can expect:
| A |
An increase in the rate of domestic economic growth in China. |
| B |
An increase in U.S. interest rates as China reduces purchases of U.S. Treasury debt. |
| C |
Europe would also abandon the peg of the euro to the dollar. |
| D |
An appreciation of the dollar in relation to the yuan. |
When the Federal Reserve uses open market operations (OMO) in an expansionary monetary policy:
| A |
The Fed will purchase stocks from banks, increasing the monetary base. |
| B |
The Fed will decrease the discount rate, decreasing the monetary base. |
| C |
The Fed will buy bonds from banks, increasing bank reserves and increasing the monetary base. |
| D |
The Fed will lower taxes and increase government spending. |
Related textbook solutions
Related questions
Which of the following statements is accurate in regards to the US dollar:
| A. |
The central bank is responsible for printing the domestic currency and the value of the currency is adjusted to maintain a fixed level to another currency. |
| B. |
The central bank has no ability to print the domestic currency and dollarization was adopted to minimize domestic inflation. |
| C. |
Banks are responsible for printing the domestic currency and there is a floating exchange rate. |
| D. |
The central bank (e.g. Federal Reserve) is responsible for printing the domestic currency and there is a floating exchange rate. |
Suppose that monetary policy in the United States leads to an increase in interest rates relative to those in Japan. Which of the following will occur in the capital account:
| A. |
The demand for yen will increase. |
| B. |
The dollar will appreciate relative to the yen. |
| C. |
The supply of dollars will increase. |
| D. |
The dollar will depreciate relative to the yen. |
An expansionary monetary policy by the Fed would tend to:
| A. |
Lower the U.S. inflation rate, make exports cheaper, make imports more expensive, and raise the value of the dollar. |
| B. |
Raise the U.S. inflation rate, make exports more expensive, make imports cheaper, and lower the value of the dollar. |
| C. |
Raise the U.S. inflation rate, make exports cheaper, make imports more expensive, and raise the value of the dollar. |
| D. |
Lower the U.S. inflation rate, make exports more expensive, make imports cheaper, and lower the value of the dollar. |
