Choose the correct statements for the fixed exchange rate regime 1. Trade surplus leads to the decrease in money supply.II. Faced with trade deficits, the central bank should sellforeign reserves.III. Fixed exchange rate regime insulates the homeeconomy from the foreign-oriented shocks.IV. Monetary policy autonomy is restricted(a) I, III(b) II, III(c) III, IV (d) II, IV

Under fixed exchange rate, the central bank peg the domestic currency to foreign currecy say US…

Answered: - Trade surplus leads to the decrease…

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- Trade surplus leads to the decrease in money supply.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 5PA

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Question

Choose the correct statements for the fixed exchange rate regime

1. Trade surplus leads to the decrease in money supply.
II. Faced with trade deficits, the central bank should sell
foreign reserves.
III. Fixed exchange rate regime insulates the home
economy from the foreign-oriented shocks.
IV. Monetary policy autonomy is restricted
(a) I, III
(b) II, III
(c) III, IV (d) II, IV

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