Question

QUESTION 9 A strong dollar places ____ pressure on inflation, which in turn places ____ pressure on the dollar. a. downward; downward b. ​downward; upward c. upward; upward d. upward; downward 2 points

QUESTION 10 The Fed may use a stimulative monetary policy with least concern about causing inflation if the dollar's value is expected to: a. remain stable b. strengthen c. weaken d. None of these will have an impact on inflation. 1 points

QUESTION 11 A weaker dollar places ____ pressure on U.S. inflation, which in turn places ____ pressure on U.S. interest rates, which places ____ pressure on U.S. bond prices. a. upward; downward; upward b. upward; upward; downward c. downward; upward; upward d. upward; downward; downward 2 points

QUESTION 12 Assume that Japan and the United States frequently trade with each other. Under the freely floating exchange rate system, high inflation in the U.S. will place ____ pressure on Japanese yen, ____ the amount of Japanese yen available for sale, and result in ____ inflation in Japan. a. downward; increase; higher b. upward; reduce; unchanged c. ​upward; increase; higher d. downward; reduce; unchanged 2 points

QUESTION 13 To weaken the dollar using sterilized intervention, the Fed will ____ U.S. dollars and simultaneously ____ Treasury securities. a. sell; buy b. buy; sell c. buy; sell d. sell; sell

Answer 1

Sol to Ques 9 :

b) Downward, Upward

As the U.S dollar strengthens against the currencies of other countries, it takes fewer dollars to purchase imported goods and the prices of the imported goods into the U.S tend to fall. The lower priced imported goods then tend to put downward pressure on the prices of competing domestically- produced goods bringing down inflation.

Gradually over time with downward inflation, th interest rate is lowered so people borrow and spend more , thus the purchasing power will increase. Due to Higher demand, the prices of goods will increase as a result leading to increased Dollar Price.

Sol to Ques 10 :

b) Strengthen

Sol to Ques 11:

b) Upward, Upward, Downward

Sol to Ques 12:

b) Upward, Reduce, Unchanged

Sol to Ques 13:

d) Sell, Sell