Given the combination of PPP with quantity theory equations, which of the follow
ID: 1100067 • Letter: G
Question
Given the combination of PPP with quantity theory equations, which of the following statements is true?
A.
Everything else remaining unchanged, the price of the foreign currency (e) would be reduced by an increase in the relative size of the money supply in the domestic economy.
B.
Everything else remaining unchanged, the price of the foreign currency (e) would be raised by an increase in the relative size of foreign production.
C.
As long as the money supplies in the two countries are the same, the exchange rate will be equal to one
D.
The exchange rate would remain unaffected as long as the relative growth in productivity between the two nations remains constant, even if the relative money supply varies between the two economies.
The monetary approach predicts that an increase in the money supply by 12 percent in both China and Thailand will:
A.
result in an appreciation of the Thai baht against the Yuan.
B.
result in a depreciation of the Thai baht against the Yuan.
C.
have no effect on the baht per Yuan exchange rate.
D.
lower the volume of trade between Thailand and China.
1. Under which of the following policies does the government enter the foreign exchange market and buy or sell foreign currency in order to influence the exchange rate of the domestic currency?
A.
Exchange controls
B.
Capital controls
C.
Official intervention
D.
Adjustable peg
1. Which of the following mechanisms cannot be adopted by a country to defend a fixed exchange rate?
A.
The government can buy or sell foreign currency in order to influence the actual exchange rate.
B.
The government can allow the currency to self-adjust and the resulting market rate will be equal to the intended rate in the fixed exchange rate regime.
C.
The government can impose a form of exchange control.
D.
The government can alter domestic interest rates in order to influence short-term capital flows.
A.
Everything else remaining unchanged, the price of the foreign currency (e) would be reduced by an increase in the relative size of the money supply in the domestic economy.
B.
Everything else remaining unchanged, the price of the foreign currency (e) would be raised by an increase in the relative size of foreign production.
C.
As long as the money supplies in the two countries are the same, the exchange rate will be equal to one
D.
The exchange rate would remain unaffected as long as the relative growth in productivity between the two nations remains constant, even if the relative money supply varies between the two economies.
Explanation / Answer
1) As long as the money supplies in the two countries are the same, the exchange rate will be equal to one
2) have no effect on the baht per Yuan exchange rate
3)Official intervention
4)The government can alter domestic interest rates in order to influence short-term capital flows
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