1.A country that commits to a maximum and minimum allowable exchange rate at a g
ID: 1219214 • Letter: 1
Question
1.A country that commits to a maximum and minimum allowable exchange rate at a given time uses a
options:
dirty float.
managed fixed exchange rate.
all of the above.
2.A sterilized purchase of international reserves by a central bank is meant to make its currency
options:
appreciate.
depreciate.
it is unsure if it will appreciate or depreciate a currency
dirty float.
managed fixed exchange rate.
all of the above.
2.A sterilized purchase of international reserves by a central bank is meant to make its currency
options:
appreciate.
depreciate.
it is unsure if it will appreciate or depreciate a currency
Explanation / Answer
1.
Managed fixed exchange rate
(This method of exchange rate control is used by central banks to impose a limit on the exchange rates of the currency and then allow it to float within those limits)
2.
Depreciate
(Increase demand of foreign currency in exchange of increased supply of domestic currency will shift the supply curve of domestic currency ot shift right, thereby depreciating it)
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