Exam 16: The International Financial System

The current account balance plus the capital account balance equals the net change in government international reserves.

The capital account describes the flow of capital between the United States and other countries.Capital inflows are

Given the size of the statistical discrepancy needed to balance the balance of payments account,one can infer that

Revaluation of a currency's value occurs when

When a reserve currency country runs a balance of payments deficit and a nonreserve currency country buys the reserve currency to finance the reserve country's deficits,the monetary base in the nonreserve country ________ and the monetary base in the reserve country ________.

Under a fixed exchange rate regime,if the domestic currency is initially ________,that is ________ par,the central bank must intervene to sell the domestic currency by purchasing foreign assets.

A Federal Reserve decision to purchase dollars by selling foreign assets in the foreign exchange market has the same effect as an open market ________ of bonds to ________ the monetary base and the money supply.

When the Bundesbank lowered German mark interest rates in September 1992,

Under dollarization,a country

Because sterilized interventions mean offsetting open market operations,there is no impact on the monetary base and the money supply,and therefore a sterilized intervention

A Federal Reserve decision to sell dollars in order to buy foreign assets in the foreign exchange market has the same effect as an open market ________ of bonds to ________ the monetary base and the money supply.

A central bank sale of ________ to purchase ________ in the foreign exchange market results in an equal decline in its international reserves and the monetary base.

The difference between merchandise exports and imports is called the current account balance.