In the early eighties, the Federal Reserve pursed a tight monetary policy. All else being equal. the impact of that policy was to interest rates in the United States relative to those in Europe and cause the dollar to _______ against European currencies?

Related Mcqs:

1. Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

   A. flow from the United States to foreign countries
   B. flow from foreign countries to the United States
   C. remain totally in foreign countries
   D. remain totally in the United States

2. If the State Bank of Pakistan wished to pursue a tight monetary policy it would ?

   A. reduce the minimum reserve asset ratio.
   B. buy government securities on the open market
   C. lower interest rates
   D. sell government securities on the open market

3. For the United States suppose the annual interest rate on government securities equals 8 percent while the annual inflation rate equals 4 percent, For Switzerland the annual interest rate on government securities equal 10 percent while the annual inflation rate equals 7 percent the above variables would cause investment funds to flow from ?

   A. the United States to Switzerland causing the dollar to depreciate
   B. the United States to Switzerland causing the dollar to appreciate
   C. Switzerland to the United States causing the franc to depreciate
   D. Switzerland to the United States causing the franc to appreciate

4. One of the transmission mechanisms of monetary policy is through consumer demand when interest rates ________ household wealth ________ and consumption _________?

   A. rise; increase, increase
   B. rise, falls, increase
   C. rise, increase, falls
   D. rise, falls, falls

5. Suppose that U.S dollar depreciates 70 percent against the yen yet Japanese export prices to Americans did not decrease by the full extent of the dollar depreciation. This is best explained by ?

   A. partial currency pass through
   B. complete currency pass through
   C. partial J curve effect
   D. complete J curve effect

6. Under managed floating exchange rates if the rate of inflation in the United States is less than the rate of inflation of its trading partners the dollar will likely ?

   A. appreciates against foreign currencies
   B. depreciates against foreign currencies
   C. be officially revalued by the government
   D. be officially devalued by the government

7. Investor engage in _____ when they move funds into foreign currencies in order to take advantage to interest rates abroad that are higher than domestic interest rates ?

   A. currency arbitrage
   B. interest arbitrage
   C. short positions
   D. long positions

8. Under floating exchange rates, expectations of higher interest rates are likely to cause an ____ of the exchange rate?

   A. depreciation
   B. appreciation
   C. fall
   D. devaluation

9. For the United States suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent For Japan the annual interest rate on government securities equals 10 percent while the annual inflation rate equals 5 percent the above variables would cause investment funds to flow from ?

   A. The United States to Japan causing the dollar to depreciate
   B. The United States to Japan causing the dollar to appreciate
   C. The Japan to United States, causing the dollar to depreciate
   D. The Japan to United States, causing the dollar to appreciate

10. The motive for holding money that encourages investors to hold bonds when interest rates are low, with the hope of selling them when interest rates are high, is the ?

    A. Transactions motive
    B. precautionary motive
    C. profit motive
    D. speculation motive