ECON 2035 Study Guide - Exchange Rate, Real Interest Rate, Monetary Policy
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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. |