Refer to the figure above. If the government of China wants to peg the exchange rate above E yuan per dollar:
A) it will have to buy dollars and sell yuan. B) it will have to buy both dollars and yuan.
C) it will have to buy yuan and sell dollars. D) it will have to sell both dollars and yuan.
Question 2
Assuming that banks have loaned all excess reserves, then an increase in checking account balances brought about by an increase in deposits is equal to
A) (the initial deposit) (the reserve ratio). B) (total reserves) ( the reserve ratio).
C) (the initial deposit) (1 / reserve ratio). D) (total reserves) (1 / reserve ratio).
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