Question
Determine if the following statements are TRUE or FALSE. Explain your answer if FALSE. a. Monetary authorities can only accumulate foreign exchange reserves if their
Determine if the following statements are TRUE or FALSE. Explain your answer if FALSE.
a. Monetary authorities can only accumulate foreign exchange reserves if their countries run current account surpluses.
b. If assets are perfect substitutes, it is irrelevant whether central banks intervene in the open market with domestic or foreign assets.
c. With fully flexible prices, temporary monetary policies are ineffective in boosting domestic output in the short run.
d. If the Marshall-Lerner condition fails, an increase in the price of foreign goods raises the domestic current account balance.
e. The Policy Trilemma for Open Economies states that governments can only choose two of the following: capital mobility, exchange rate stability, and monetary policy autonomy.
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