Maroeconomices

Multiple Choice Questions
1. Which of the following are domestic assets for a country’s central bank?
I. Debt securities
II. Loans to banks
III. Foreign currency assets
IV. Currency
V. Deposits to the central bank from banks
a. I
b. I and II
c. I, II, and III
d. I, II III, IV, and V
ANSWER: B
2. The sum of currency and deposits to the central bank from commercial banks is called:
a. The money supply.
b. Domestic assets.
c. The monetary base.
d. Fractional reserves.
ANSWER: C
3. Official intervention in the foreign exchange market to defend a fixed exchange rate when the value of domestic currency is under downward pressure:
a. Causes international reserve holdings to rise.
b. Has no impact on the domestic money supply.
c. Causes the domestic money supply to rise.
d. Causes the domestic money supply to fall.
ANSWER: D
4. If a country has an official settlements balance surplus so that the exchange rate value of the country's currency is experiencing upward pressure:
I. The central bank must intervene to buy foreign currency and sell domestic currency.
II. Its balance sheet will show an increase in official international reserve holdings.
III. Its balance sheet will show an increase in its liabilities.
a. I
b. I and II
c. II and III
d. I, II and III
ANSWER: D
5. __________ the money supply __________ domestic interest rates.
a. Expanding; increases
b. Expanding; decreases
c. Contracting; decreases
d. Contracting; has no impact on
ANSWER: B
6. __________ the money supply causes capital __________.
a. Expanding; outflows
b. Expanding; inflows
c. Contracting; outflows
d. Contracting; to remain the same.
ANSWER: A
7. The initial impact of __________ the money supply __________ the Balance of Payments.
a. Expanding; worsens
b. Expanding; improves
c. Contracting; worsens
d. Contracting; has no effect on
ANSWER: A
8. The initial impact of __________ the money supply __________ the Balance of Payments.
a. Expanding;