Question

1. A sterilized purchase of international reserves by a central bank is meant to make its currency

Select one:

a. appreciate.

b. depreciate.

c. neither appreciate nor depreciate.

d. cannot be determined.

Income has an impact on money demand in both Keynes's and Friedman's approach to money demand.

Select one:

True

False

The precautionary motive of holding money implies that money demand falls with a decrease in interest rates.

Select one:

True

False

Answer 1

1. A sterilized purchase of international reserves by a central bank is meant to make its currency  

- c. neither appreciate nor depreciate.

2.  Income has an impact on money demand in both Keynes's and Friedman's approach to money demand.

- TRUE

3. The precautionary motive of holding money implies that money demand falls with a decrease in interest rates.

- FALSE ( The relationship between money demand and interest rate is inverse in nature)