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Author Question: Use a figure to show the effect of a sterilized central bank purchase of foreign assets under the ... (Read 115 times)

KWilfred

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on: Jun 30, 2018
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.


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Kjones0604

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Reply #1 on: Jun 30, 2018
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

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Reply 2 on: Jun 30, 2018
Great answer, keep it coming :)

ricroger

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Reply 3 on: Yesterday
Gracias!

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