Question 1

Make use of a T-account to show the effect of the Fed's sale of $500 million worth of foreign government securities on the Fed's balance sheet.(assume the Fed receives a check from the sale of securities).

Accepted Answer

The answer of Make use of a T-account to show...

Question 2

How did maintaining the gold standard deepen the severity of the Great Depression?

Accepted Answer

The answer of How did maintaining the gold standard deepen...

Question 3

Which of the following three goals that make up the policy trilemma can be achieved at the same time in the United States?

Accepted Answer

A)  exchange rate stability and free capital flows 
B)  monetary policy independence and exchange rate stability 
C)  free capital flows and monetary policy independence 
D)  exchange rate stability, free capital flows, and monetary policy independence

Question 4

When someone in a country buys an asset abroad,the transaction is recorded

Accepted Answer

A)  in the current account. 
B)  in the official settlements balance. 
C)  in the financial account as a capital inflow. 
D)  in the financial account as a capital outflow.

Question 5

If the U.S.current account balance is negative,

Accepted Answer

A)  its financial account is likely to be positive. 
B)  its financial account is likely to be negative. 
C)  it must use official settlements to balance its payments. 
D)  its balance of payments cannot be zero.

Question 6

Make use of a T-account to show the effect of the Fed's purchase of $5 billion worth of foreign government securities on the Fed's balance sheet (note: assume the Fed writes a check to purchase the securities).

Accepted Answer

The answer of Make use of a T-account to show...

Question 7

International financial transactions are most likely to affect the U.S.monetary base when

Accepted Answer

A)  the United States is in recession. 
B)  the United States is experiencing a severe inflation. 
C)  the Fed tries to influence the foreign-exchange value of the dollar. 
D)  interest rates in the United States are highly variable.

Question 8

If a central bank wishes to raise the foreign-exchange value of its currency,it will

Accepted Answer

A)  buy domestic currency and sell foreign assets. 
B)  sell domestic currency and buy foreign assets. 
C)  attempt to reduce domestic interest rates. 
D)  attempt to raise the domestic price level relative to foreign price levels.

Exam 16: The International Financial System and Monetary Policy