Exam 6: Government Influence on Exchange Rates

The European Central Bank is responsible for monetary policy in all participating European countries.

The Bank of England is responsible for setting the monetary policy for the European countries participating in the euro.

Which of the following is not true regarding Thailand

Consider two countries that trade with each other,called X and Y.  According to the text,inflation in Country X will have a greater impact on inflation in Country Y under the _______ system.  Now,consider two other countries that trade with each other,called A and B.  Unemployment in Country A will have a greater impact on unemployment in Country B under the _______ system.

A strong dollar places _______ pressure on inflation,which in turn places _______ pressure on the dollar.

If the Fed desires to weaken the dollar without affecting the dollar money supply,it should:

Assume countries A,B,and C produce goods that are substitutes of each other and that these countries engage in trade with each other.  Assume that country A's currency floats against country B's currency,and that country C's currency is pegged to B's.  If A's currency depreciates against B,then A's exports to C should _______,and A's imports from C should _______.

Market forces are the determinant of exchange rates in a freely floating exchange rate system.

The establishment of the euro allows for more consistent economic conditions across countries but eliminates the power of any individual European country to solve local economic problems with its own unique monetary policy.

An example of indirect intervention by the Bank of Japan would be for the Bank of Japan to use interest rates to increase the value of the Yen vs.the dollar.

The exchange rate mechanism (ERM)crisis in 1992 represents the __________ in German interest rates that caused other European interest rates to __________,and resulted in less aggregate spending.

When using indirect intervention,a central bank is likely to focus on:

A weak dollar is normally expected to cause:

The European countries conforming to the euro are completely insulated from movements in the euro's value with respect to other currencies.

Which of the following are examples of currency controls

A major advantage of the euro is the complete elimination of exchange rate risk on transactions between participating European countries,which encourages more trade and capital flows within Europe.

Assume a central bank exchanges its currency for other foreign currencies in the foreign exchange market,but does not adjust for the resulting change in the money supply.  This is an example of:

The Asian crisis is generally believed to have started in Japan.

In a sterilized exchange rate arrangement,a country's home currency value is pegged to a foreign currency or to some unit of account.

If a government wishes to stimulate its economy in the form of increased foreign demand for its country's products,it could attempt to weaken its currency.