Question : 18.2   Central Bank Intervention and the Money Supply 1) A central : 1303642

 

18.2   Central Bank Intervention and the Money Supply

 

1) A central bank’s international reserves consists of its holdings of

A) gold.

B) silver and gold.

C) foreign assets and gold.

D) domestic assets and precious metals.

E) foreign and domestic currency holdings.

 

 

2) The liabilities side of a central bank’s accounts consists of

A) deposits held by private banks.

B) currency in circulation.

C) deposits held by private banks and currency in circulation.

D) deposits held by foreign banks, domestic assets, and currency in circulation.

E) foreign assets and domestic assets.

 

 

3) Which one of the following statements is most correct?

A) Any central bank purchase of assets automatically results in an increase in the domestic money supply, while any central bank sale of assets automatically causes the money supply to decline.

B) Any central bank purchase of assets results in an increase in the domestic money supply, while any central bank sale of assets causes the money supply to decline.

C) Any central bank purchase of assets automatically results in a decrease in the domestic money supply, while any central bank sale of assets automatically causes the money supply to decline.

D) Any central bank purchase of assets automatically results in a decrease in the domestic money supply, while any central bank sale of assets automatically causes the money supply to increase.

E) Any central bank purchase of assets automatically results in an increase in the domestic money supply, while any central bank sale of assets does not necessarily affect the money supply.

 

4) Which one of the following statements is the most correct?

A) 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 an increased home money supply.

B) 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.

C) 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 an increased home money demand.

D) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated decrease in the home central bank’s foreign asset implies an increased home money supply.

E) If central banks are not sterilizing and the home country has a balance of payments shortage, any associated decrease in the home central bank’s foreign asset implies an increased home money supply.

 

 

5) Which one of the following statements is most correct?

A) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in a foreign central bank’s claims on the home country implies a decreased foreign money supply.

B) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated decrease in a foreign central bank’s claims on the home country implies a decreased foreign money demand.

C) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated decrease in a foreign central bank’s claims on the home country implies a decreased foreign money supply.

D) If central banks are not sterilizing and the home country has a balance of payments shortage, any associated decrease in a foreign central bank’s claims on the home country implies a decreased foreign money supply.

E) If central banks are not sterilizing and the home country has a balance of payments shortage, any associated decrease in a foreign central bank’s claims on the home country implies an increased domestic money supply.

 

6) A balance sheet for the central bank of Pecunia is shown below:

 

Central Bank Balance Sheet

AssetsLiabilities

Foreign assets$1,000              Deposits held by private banks              $500

Domestic assets$1,500Currency in circulation              $2,000

 

Please write the new balance sheet if the bank sells $100 worth of foreign bonds for domestic currency.

 

 

 

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