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Question
A sterilized intervention is actually a combination of two transactions. What are they and what is the effect on the monetary base?Answer
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The strong appreciation of the dollar for the last part of the 1990s: A. was a benefit to all U.S. residents but costly to most foreign producers.B. was a benefit to U.S. exporters, but put a severe strain on U.S. Importers.C. was welcomed by all U.S. manufacturers.D. played a key role in keeping inflation in check even though the economy was growing rapidly.
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An increase in the real interest rate on U.S. bonds, everything else equal, will have the following impact on the foreign exchange market: A. the demand for dollars will decrease.B. the supply of dollars will increase.C. the dollar will depreciate relative to foreign currencies.D. the demand for dollars will increase.
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