Use a figure to show the effect of a sterilized central bank ...

[KWilfred]

Use a figure to show the effect of a sterilized central bank purchase of foreign assets under the imperfect asset substitutability assumption.
 
  What will be an ideal response?

Question 2

If a small country imposes a tariff, then
 
  A) the producers must suffer a loss.
  B) the consumers must suffer a loss.
  C) the government revenue must suffer a loss.
  D) the demand curve must shift to the left.
  E) the world price on that item will shift.

[Kjones0604]

Answer to Question 1

The interest parity condition is given by
R = R + ( - E)/E +
Suppose that the domestic assets of the central bank fall from to through a sterilized purchase of foreign assets. Then the risk-adjusted return increases and the exchange rate increases.

Answer to Question 2

B

[KWilfred]

YES! Correct, THANKS for helping me on my review

[Sarahjh]

Thanks for the timely response, appreciate it