Suppose that we observe the following change in the international market for USD: USD B D Suppose that the Central Bank of Canada wants to maintain a fixed exchanged rate at the price given in A & C. How would it go about doing so? O t would sell USD on the world market., causing the USD to depreciate. It would buy USD on the world market, causing the USD to depreciate. O It would sell USD on the world market., causing the USD to appreciate. It would buy USD on the world market, causing the USD to appreciate. vped answer needed

Suppose that we observe the following change in the international market for USD: USD B D Suppose that the Central Bank of Canada wants to maintain a fixed exchanged rate at the price given in A & C. How would it go about doing so? O t would sell USD on the world market., causing the USD to depreciate. It would buy USD on the world market, causing the USD to depreciate. O It would sell USD on the world market., causing the USD to appreciate. It would buy USD on the world market, causing the USD to appreciate. vped answer needed

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter19: The International Monetary System: Order Or Disorder

Section: Chapter Questions

Problem 8DQ

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If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.
You have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible. What is the effect on the foreign exchangemarket (the $ market)? 12. What impact will this have on imports?A. increaseB. decreaseC. remains unchanged 13. What impact does the change in the exchangerate have on aggregate demand?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged 14. What happens to the aggregate supply curve?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged
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