Multiple Choice of the International Financial System

Chapter 13 The International Financial System

13.1 Multiple Choice

1) A central bank sale of _____ to purchase ______ in the foreign exchange market

results in an equal rise in its international reserves and the monetary base.

A) foreign assets; domestic currency

B) foreign assets; foreign currency

C) domestic currency; foreign assets

D) domestic currency; domestic currency

Answer: C

2) A central bank sale of _____ to purchase ______ in the foreign exchange market

results in an equal decline in its international reserves and the monetary base.

A) foreign assets; domestic currency

B) foreign assets; foreign currency

C) domestic currency; foreign assets

D) domestic currency; domestic currency

Answer: A

3) A central bank _____ of domestic currency and corresponding _____ of foreign

assets in the foreign exchange market leads to an equal _____ in its international

reserves and the monetary base.

A) sale; purchase; decline

B) sale; sale; increase

C) purchase; sale; increase

D) purchase; sale; decline

Answer: D

4) A central bank _____ of domestic currency and corresponding _____ of foreign

assets in the foreign exchange market leads to an equal _____ in its international

reserves and the monetary base.

A) sale; purchase; increase

B) sale; sale; decline

C) purchase; sale; increase

D) purchase; purchase; decline

Answer: A

6) A foreign exchange intervention with an offsetting open market operation that

leaves the monetary base unchanged is called

A) an unsterilized foreign exchange intervention.

B) a sterilized foreign exchange intervention.

C) an exchange rate feedback rule.

D) a money neutral foreign exchange intervention.

Answer: B

7) An unsterilized intervention in which domestic currency is sold to purchase foreign

assets leads to

A) a gain in international reserves.

B) an increase in the money supply.

C) an appreciation in the domestic currency.

D) all of the above.

E) only (A) and (B) of the above.

Answer: E

8) An...