Quiz10 - Quiz 10 1. The Federal Reserve Bank uses open...

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Quiz 10 1. The Federal Reserve Bank uses open market operations to directly affect: a. Consumption b. The money supply c. Government purchases d. Investment e. Capital Outflows Answer: b 2. Suppose that the one year Swiss franc interest rate is 5% and the one year U.K. interest rate is 4%. If the one year forward rate is 0.45 pounds per francs what must the spot exchange rate be (£/Sfr) if covered interest parity holds? A) 0.2250 B) 0.4455 C) 0.4545 D) 1.4500 E) 0.4645 Answer: c 3. Assets of the central bank include: a. Currency in circulation. b. Bank Reserves held by commercial banks. c. Domestic Credit. d. Foreign Reserves. e. c and d. Answer e 4. A country can operate a fixed exchange rate and practice independent monetary policy if and only if a) it eliminates all tariffs b) it targets a zero inflation rate c) it imposes wage and price controls d) it restricts inflows and outflows of financial capital e) the central bank agrees to monetarize all fiscal deficits Answer: d
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5. The difference between covered and uncovered interest parity is that
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Quiz10 - Quiz 10 1. The Federal Reserve Bank uses open...

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