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Author Question: Assume the exchange rate of the domestic currency is overvalued. What does the central bank need to ... (Read 200 times)

Chloeellawright

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on: Jun 30, 2018
Assume the exchange rate of the domestic currency is overvalued. What does the central bank need to do in order to keep the exchange rate fixed?
 a. There is no need to intervene since the domestic currency is not undervalued.
  b. It needs to increase the money supply by raising the discount rate.
  c. It needs to sell the excess demand for foreign currency.
  d. It needs to buy the excess supply of foreign currency.
  e. It needs to decrease the money supply by lowering the discount rate.

Question 2

Cashing out capital gains in Virtual Currency System 3 (i.e., turning virtual capital gains into real world currencies) causes the nation's:
 a. Monetary base to rise.
  b. M2 money supply to fall.
  c. M2 money multiplier to fall.
  d. Monetary base to remain the same.


lcapri7

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Reply #1 on: Jun 30, 2018
Answer to Question 1

.C

Answer to Question 2

.D


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Chloeellawright

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Reply #2 on: Jun 30, 2018
Thank you


lcapri7

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Reply #3 on: Jun 30, 2018
No problemo


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