QUESTION 1

1. Which of the following statements isTRUE?
2. The foreign exchange market is free of government intervention
3. The difference between covered and uncovered interest rate parity is that the former uses the forward rate to "cover" for the expected exchange rate
4. Basic premise is that unhedged returns from investing in different currencies should be the same, regardless of their interest rates
5. Central banks engage in international financial transactions called overnight repo operations in order to influence exchange rates

1 points

QUESTION 2

1. How does the Federal Reserve (FED) use open market operations to conduct monetary policy?
2. Raising or cutting the overnight repo rate
3. Raising or cutting interest rates
4. Buying and selling govt securities in the open market
5. Raising or cutting the discount rate

1 points

QUESTION 3

1. Which of the following statements isTRUE?
2. At lower interest rates, investment is lower, therefore less output (IS)
3. The IS curve shows the different combinations of interest rates and savings at which total investment equals total savings
4. Intersection of Investment Savings (IS) & Liquidity Preference / Money Supply (LM) curve shows the equilibrium point of interest rates and output where money market and the real economy are in balance
5. Lower levels of income (GDP) induce increased demand to hold money balances for transactions, which require a higher int to keep money supply & demand in equilibrium

1 points

QUESTION 4

1. An unsterilized intervention in which domestic currency is sold to purchase foreign assets leads to __________
2. a gain in international reserves, an increase in the money supply, and a depreciation of the domestic currency
3. a loss in international reserves, an increase in the money supply, and a depreciation of the domestic currency
4. a gain in international reserves, a decline in the money supply, and a depreciation of the domestic currency
5. a loss in international reserves, an increase in the money supply, and an appreciation of the domestic currency

1 points

QUESTION 5

1. Which of the following statements isTRUE?
2. To overcome a liquidity trap, the government can implement deficit spending policy to jumpstart demand
3. Keynesians suggest contractionary fiscal policy is the conventional measure to overcome a liquidity trap
4. Keynesians suggest contractionary monetary policy is the conventional measure to overcome a liquidity trap
5. Monetarists suggest expansionary monetary policy is the conventional measure to overcome a liquidity trap

1 points

QUESTION 6

1. What is a central bank trying to achieve when implementing monetary policy via raising or lowering interest rates?
2. Manipulate demand and supply
3. Control non-performing loans
4. Price stability and steady inflation rate
5. Interest rate stability

1 points

QUESTION 7

1. Fiscal policy can be implemented more quickly than monetary policy. True or False?
2. True
3. False

1 points

QUESTION 8

1. If a central bank intervenes in the foreign exchange market, it gives up some control over its money supply and ______
2. the purchase of foreign assets results in a decrease in the currency worldwide
3. the sale of foreign assets results in an increase in the currency worldwide
4. the sale of foreign assets results in a decrease in the currency worldwide
5. no change in the currency value as stated under covered interest parity condition

1 points

QUESTION 9

1. Which of the following statements isTRUE?
2. When there is deflation, consumers and investors delay spending and investing because they think they can do so at lower prices in the future
3. When there is deflation, the central bank will raise interest rates to econurage consumers and investros to spend more as interst rates might go higher
4. When there is deflation, consumers and investors increase spending and investing because they think they can do so at lower prices in the future
5. When there is deflation, consumers and investors delay spending and investing because of the liquidity trap

1 points

QUESTION 10

1. Which of the following is a suitable nominal anchor for monetary policy?
2. Real interest rates
3. Nominal GDP
4. Core inflation
5. Exchange rate