5. The currency of Country X is pegged to the currency of Country Y. Assume that Country Y's currency depreciates against the currency of Country Z. It is likely that Country X will export to Country Z and import from Country Z a. more; more b. less: less c. more; less d. less; more 6. If the Fed desires to weaken the dollar without affecting the dollar money supply, it should: a. exchange dollars for foreign currencies, and sell some of its existing Treasury b. c. d. security holdings for dollars. exchange foreign currencies for dollars, and sell some of its existing Treasury security holdings for dollars. exchange dollars for foreign currencies, and buy existing Treasury securities with dollars. exchange foreign currencies for dollars, and buy existing Treasury securities with dollars 7. An example of indirect intervention by the Bank of Japan would be for the Bank of Japan to use interest rates to increase the value of the yen vs. the dollar. a. True b. False 8. A central bank may attempt to stimulate a stagnant economy by weakening the value of the currency a. True b. False 9. Assume that the dollar has been consistently depreciating over a long period. The Fed decides to counteract this movement by intervening in the foreign exchange market using sterilized intervention. The Fed would a. buy dollars with foreign currency and simultaneously sell Treasury securities for b. buy dollars with foreign currency and simultaneously buy Treasury securities with c. sell dollars for foreign currency and simultaneously sell Treasury securities for d. sell dollars for foreign currency and simultaneously buy Treasury securities with e. none of the above dollars. dollars dollars. dollars. 10. Assume the bid rate of a New Zealand dollar is $.33 while the ask rate is $.335 at Bank X. Assume the bid rate of the New Zealand dollar is $.32 while the ask rate is $.325 at Bank Y. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the $1,000,000 you started with? a. $15,385