Question

Question 1. Answer true or false or uncertain, please explain briefly a) Consider a country that...

Question 1.
Answer true or false or uncertain, please explain briefly

a)
Consider a country that adopts the fixed exchange rate system and uses monetary policy to sustain the fixed exchange rate.

—To counter a speculative attack on its currency,the central bank must tighten monetary policy.

Answer true,false,or uncertain.Please briefly explain your answer:

b)
—In a small open economy,the domestic real interest rate can be higher than the world real interest rate.

Answer true,false,or uncertain.Please briefly explain your answer.
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

answer 1

A. True

Because. tight monetary policy reduces liquidity and increase interest rate which has a negative impact on both production and consumption and therefore economic growth.


B. True

Because

the real interest rate reflect the purchasing power value of the interest paid on an investment or loan and represents the rate of time preference of borrower and lender. Because inflation rate are not constant prospective real interest rate must relay on estimates of expected future inflation over the time to maturity of a loan or investment.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Answer True, False, or uncertain and briefly explain your reasoning. "A depreciation of the (real) exchange...
Answer True, False, or uncertain and briefly explain your reasoning. "A depreciation of the (real) exchange rate always increases net exports."
Label each of the following statements true, false, or uncertain. Explain your choice carefully. a. When...
Label each of the following statements true, false, or uncertain. Explain your choice carefully. a. When domestic inflation equals foreign inflation, the real exchange rate is fixed. b. A devaluation is an increase in ? when the nominal exchange rate ? is defined as the price of the domestic currency in terms of foreign currency. c. A change in the expected future exchange rate changes the current exchange rate. d. Because economies tend to return to their natural level of...
True or false and explain please. 1.Like gold standard, the currency board (foreign exchange rate policy)...
True or false and explain please. 1.Like gold standard, the currency board (foreign exchange rate policy) is doomed to fail. 2.For euro to become a world currency, it is necessary that the eurozone countries run long-term trade deficits. 3.For a country with deficit in current account, devaluation of domestic currency will help reduce the deficit immediately. 4.In a nation which pegs its currency to the U.S. dollar at fixed exchange rates, it is very likely that the central bank must...
State whether the following statements are TRUE or FALSE. Briefly explain your answer. a. When the...
State whether the following statements are TRUE or FALSE. Briefly explain your answer. a. When the Federal Reserve conducts an open sale of government bonds, the federal funds rate will fall. b. An expansionary monetary policy does not lead to an increase in output in the short run.
Explain whether the given statement is true, false or uncertain. Start your answer by selecting one...
Explain whether the given statement is true, false or uncertain. Start your answer by selecting one of the options – “True”, “False” or “Uncertain” and then provide arguments to justify your selection (be brief and concise and present your arguments in 100 or less words). You need to ensure your assumptions are clear, reasonable and explicit if making any. Question: The saving rate (gross domestic saving as a % of GDP) in Singapore, a small open economy, was 48% in...
Briefly explain after you decide if the statement is True, False or Uncertain 1. The Original...
Briefly explain after you decide if the statement is True, False or Uncertain 1. The Original Philips Curve (before 1970s) uses expected inflation as last year’s inflation 2. Using the Solow growth model, with or without technology, an economy that increases its saving rate will always experience faster growth 3. When labor force is constant, if the number of employed workers in a country decreases, the unemployment rate in the country will increase 4. The zero lower bound refers to...
Answer if each statement is true, false, or uncertain. Support your answer with a few lines....
Answer if each statement is true, false, or uncertain. Support your answer with a few lines. 1. When the real wage is below the equilibrium price in the labor market we have an excess demand of labor and the real wage should increase. 2. With perfect capital mobility, the domestic real interest rate must be the same as the world real interest rate. 3. In the quantity theory of money, real output is an endogenous variable. 4. The Keynesian consumption...
true or false: ) 1. Like gold standard, the currency board (foreign exchange rate policy) is...
true or false: ) 1. Like gold standard, the currency board (foreign exchange rate policy) is doomed to fail. (2) You are to buy ¥200m with Australian dollars through a forward contract maturing in 6 months. The forward price is F6(¥/A$)=100. If the spot rate at the maturity is S6(¥/A$)=80. You have a loss in the forward trading. (3) For euro to become a world currency, it is necessary that the eurozone countries run long-term trade deficits. (4) For a...
QUESTION 6 Suppose a country wants a fixed exchange rate for its currency above the market...
QUESTION 6 Suppose a country wants a fixed exchange rate for its currency above the market exchange rate. It will, a. run a narrow balance of payments surplus b. use up some of its foreign currency reserves to do so c. both A and B d. neither A nor B QUESTION 7 Suppose a country maintains a fixed exchange rate for its currency below the market exchange rate. It will, a. run a narrow balance of payments surplus b. build...
Question: A significant increase in inflation in a country causes, a. investors to sell domestic assets...
Question: A significant increase in inflation in a country causes, a. investors to sell domestic assets b. foreign exchange market pressure to depreciate the domestic currency c. currency traders to sell the domestic currency d. all of the above Question 2 Capital flight from a domestic country tends to cause, a. selling of the domestic country's currency b. weakening of the domestic country's currency c. greater difficulty of domestic borrowers in repaying debt denominated in a foreign currency d. all...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT