QUESTION 3 How are purchases or sales of foreign currency by a central bank are related to monetary policy? O A. a purchase of foreign currency will increase money supply B. a purchase of foreign currency will reduce the nominal exchange rate OC.a purchase of foreign currency will reduce money supply O D. a purchase of foreign currency will increase the nominal exchange rate

QUESTION 3 How are purchases or sales of foreign currency by a central bank are related to monetary policy? O A. a purchase of foreign currency will increase money supply B. a purchase of foreign currency will reduce the nominal exchange rate OC.a purchase of foreign currency will reduce money supply O D. a purchase of foreign currency will increase the nominal exchange rate

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(1) In the IS-LM model, how does an increase in money supply affect theIS curve?(2) According to the Impossible Trinity, if an economy wants to allow for free capitalflows as well as to have full control over its currency, which exchange rate systemshould be adopted?(3) In an IS-LM model, if the investors are suddenly less willing to invest, then what effects does this change make to the equilibrium? Explain your intuitions.(4) According to your answers in (3), if the government wants to stabilize the interestrate using monetary policies, how should it behave? If the government, instead, wantsto stabilize the output level using monetary policies, what is your policy suggestion forit?
Part A its a long question. in your own words
QUESTION 3 How are purchases or sales of foreign currency by a central bank are related to monetary policy? OA. a purchase of foreign currency will increase money supply B. a purchase of foreign currency will reduce the nominal exchange rate C. a purchase of foreign currency will reduce money supply O D. a purchase of foreign currency will increase the nominal exchange rate
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