Author Question: Suppose policy makers are pursuing a policy to fix the exchange rate. In such a system with perfect ... (Read 131 times)

strangeaffliction · **on:** Jun 30, 2018

Suppose policy makers are pursuing a policy to fix the exchange rate. In such a system with perfect capital mobility, an open market sale of domestic bonds by the domestic central bank will eventually result in

A) a permanent increase in the monetary base.
B) a permanent reduction in the monetary base.
C) a gradual reduction in the domestic interest rate.
D) a change in the composition of the monetary base.

Question 2

A reduction in the saving rate will not affect which of the following variables in the long run?

A) output per worker
B) the growth rate of output per worker
C) the amount of capital in the economy
D) capital per worker
E) none of the above