1. Under the fixed exchange rate, the devaluation of domestic currency causes output to increase and exchange rate remains unchanged. (diagram required)
2 In the interest parity condition with imperfect substitute assets and risk premium. an increased stock of domestic government debt will raise the difference between the expected returns on domestic and foreign currency bonds.
3. The "rule of the game" under the gold standard can best be described as selling domestic assets in a surplus
4. A sterilized foreign exchange intervention carried out by a central bank leads to large fluctuations in the domestic money supply
5. If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank’s foreign asset implies a decreased home money supply.
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