main reason that U.S. currency cannot be turned in to the government in exchange for a tangible asset such as gold is that: This gives the government more freedom to manage the nation's money supply U.S. currency is the debt of the Federal Reserve Banks Government officials enjoy acquiring assets and don't want to lose anything tangible People prefer tangible item

main reason that U.S. currency cannot be turned in to the government in exchange for a tangible asset such as gold is that: This gives the government more freedom to manage the nation's money supply U.S. currency is the debt of the Federal Reserve Banks Government officials enjoy acquiring assets and don't want to lose anything tangible People prefer tangible item

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter6: Government Influence On Exchange Rates

Section: Chapter Questions

Problem 31QA

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To force the value of the British pound to depreciate against the dollar, the Federal Reserve should: A. sell pounds for dollars in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. B. sell dollars for pounds in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. C. sell dollars for pounds in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market. D. sell pounds for dollars in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market.
An important problem with the gold standard was that a. one country could easily manipulate the system to its advantage and the disadvantage of other countries. b. a country did not have control of its domestic monetary policy. c. exchange rates tended to fluctuate a great deal, making it difficult for businesses to make long-run plans. d. it was too complicated and restricted business activity.
The pressures on the foreign exchange market are such that they cause the British pound to depreciate against the US dollar. If the British pound tries to maintain the exchange rate against the US dollar, which of the following pressures will stop the pressure to devalue the British pound? a. Britain has to sell pounds to buy dollarsb. Britain will have to increase its money supply to create a domestic product c. Britain must buy pounds and sell dollarsd. Britain should do nothing as a fixed interest rate does not change
Why might a foreign government’s policies be closely monitored by investors in other countries, even if the investors plan no investments in that country? Explain how monetary policy in one country can affect interest rates in other countries.
Some countries have low interest rates and appreciating currencies because they are politically stable. their central banks intervene in the foreign exchange market to support the currency. their inflation rates are low, making the real interest rates high. they have developed financial systems.
Why do governments intervene in the foreign exchange market? Check all that apply: To maintain exchange rate boundaries To reduce fear in financial markets To smooth out the business cycle To smooth out exchange rate movements To earn a profit for the government