Interest differentials cause exchange rate changes
Indicate whether the statement is true or false
FALSE
Explanation: In the real world interest rates, inflation expectations, and exchange rates are jointly affected by new information and new events. So, interest rates and exchange rates are determined simultaneously.
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If a country that fixes its exchange rate has an undervalued exchange rate, then it will ________ reserves, unless it ________ its money supply to the appropriate level
A) gain; increases B) lose; increases C) lose; decreases D) gain; decreases
A central bank can bring output back up to efficient level in the New Keynesian model by
A) decreasing the money supply. B) increasing the money supply. C) decreasing government expenses. D) increasing government expenses.
Equipment used to produce other goods and services are called:
A. financial capital. B. inventories. C. human capital. D. physical capital.
The Fed engages in an expansionary money policy by ______ the money supply and ______ the interest rate.
a. decreasing; decreasing b. decreasing; increasing c. increasing; decreasing d. increasing; increasing