A managed floating exchange rate system is characterised by which of the following:
(a) The exchange rate varies with the market forces of supply and demand.
(b) Some intervention by Central Banks is occasionally required.
(c) Intervention by Central Banks usually occurs when the currency is either very strong or very weak.
(d) All of the above.
Answer: (d) All of the above.
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The federal funds market is the market in which
a. banks lend and borrow reserves from each other for short periods of time b. the Fed loans reserves to banks for short periods of time c. banks withdraw reserves from the Fed for short periods of time d. government borrows from the fed for short periods of time e. the Fed borrows from the government for short periods of time
Suppose that you purchase a $5,000 bond that pays 7 percent interest annually and matures in five years. If you expect that the inflation rate during the next five years will be 2 percent annually, what real rate of return do you expect to earn?
a. 2 percent b. 5 percent c. 7 percent d. 9 percent
Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and GDP Price Index in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period rises, and GDP Price Index rises. b. The quantity of real loanable funds per time period falls, and GDP Price Index falls. c. The quantity of real loanable funds per time period rises, and GDP Price Index falls. d. The quantity of real loanable funds per time period and GDP Price Index remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
The federal funds rate is the
What will be an ideal response?