How can nations fix their exchange rates?
a. Either by imposing strict exchange controls or by setting interest rates at the same level as the country with which they want to fix the exchange rate.
b. Either by imposing strict exchange controls or by keeping inflation at the same rate as the country with which they want to fix the exchange rate.
c. Nominal exchange rates cannot be fixed.
d. Either by imposing strict exchange controls or by obligating the central bank to intervene in the foreign exchange market to keep the exchange rate at its chosen rate.
e. Either by keeping inflation at the same rate or by setting interest rates at the same level as the country with which they want to fix the exchange rate.
Question 2 - Cashing out capital gains in Virtual Currency System 3 (i.e., turning virtual capital gains into real world currencies) causes the nation's:
a. Monetary base to remain the same.
b. M2 money supply to fall.
c. M2 money multiplier to fall.
d. M2 money supply to rise.
Question 3 - China collectivized its agriculture during the Cultural Revolution.
a. True
b. False
Question 4 - Assume the exchange rate of the domestic currency is overvalued. What does the central bank need to do in order to keep the exchange rate fixed?
a. There is no need to intervene since the domestic currency is not undervalued.
b. It needs to increase the money supply by raising the discount rate.
c. It needs to sell the excess demand for foreign currency.
d. It needs to buy the excess supply of foreign currency.
e. It needs to decrease the money supply by lowering the discount rate.
Question 5 - Cashing out capital gains in Virtual Currency System 3 (i.e., turning virtual capital gains into real world currencies) causes the nation's:
a. Monetary base to rise.
b. M2 money supply to fall.
c. M2 money multiplier to fall.
d. Monetary base to remain the same.
Question 6 - SOEs refer to China's rapidly growing service sector
a. True
b. False
Question 7 - Assume the exchange rate of the domestic currency is overvalued. What does the central bank need to do in order to keep the exchange rate fixed?
a. There is no need to intervene since the domestic currency is not undervalued.
b. It needs to increase the money supply by raising the discount rate.
c. It needs to sell the excess demand for foreign currency.
d. It needs to buy the excess supply of foreign currency.
e. It needs to decrease the money supply by lowering the discount rate.
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