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Author Question: Please draw a figure illustrating the actions the central bank must take to maintain a fixed ... (Read 123 times)

bclement10

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on: Jun 30, 2018
Please draw a figure illustrating the actions the central bank must take to maintain a fixed exchange rate following an increase in output.
 
  What will be an ideal response?

Question 2

The euro is said to be selling at a ________ if the spot dollar price is 1.18 and the nine-month forward rate is 1.16.
 
  A) forward discount
  B) forward premium
  C) forward spread
  D) none of the above


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carojassy25

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

A rise in output from to will increase the real money demand, so the central bank must purchase foreign assets and raise the money supply from to , in order to maintain a fixed exchange rate .

Answer to Question 2

A


bclement10

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

cpetit11

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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