Consider the same increase in the foreign interest rate in the previous question; under a fixed exchange rate system. A. This cannot occur under a fixed exchange rate. 8. Individuals will want to acquire assets denominated in foreign currency. They will export more goods in order to do this, and the country should see an improvement in their current account which is consistent with the worsening in their cabial account C. Individuals will want to acquire assets denominated in foreign currency. The domestic central bank must decrease the domestic money supply in order to maintain the fied exchange rate. In the end, outout and the current account is unaffected. D. Individuals will want to acquire assets denominated in foreign currency. The domestic central bank must decrease the domestic money supply in order to maintain the fixed exchange rate. In the end, outout will decrease because of the decrease in the money supply, and the current account will improve because incomes (and therefore imports) have fallen. E. Individuals will want to acquire assets denominated in fore gn currency. The central bank has no choice but to lower domestic interest rates in order to let individuals borrow so they can make these foreign investments

One purpose of a devaluation of the Home currency (E rises) following currency crises is alts risky because A The devaluation will compensate speculators for their losses. The devaluation can undershoot its long: fur volle. B. The devaluation will raise the return on Home currency assets. The devaluation can undershoot its long: fun value C. The devaluation will raise the cost of Forelgn-made goods and increase the trade account. A J-curve effect may be present and the trade account can worsen instead of improve, making the situation worse D. The devaluation will increase the value of the Foreign assets held by the central bank. The devaluation wil make Foreign goods more expensive in the home market