Question Details

By conducting monetary policy as if we were on a fixed exchange rate 



1. "Finally, there is the question of monetary policy and imported inflation. Under a fixed exchange rate, Canadian inflation would be much more closely tied to that of the U.S. Given the experience of the last few years, that may not be a bad thing." If a fixed exchange rate were adopted in this situation Canadian monetary policy would 
a) ease b) tighten c) remain unchanged d) become erratic 
2. "The British money supply was allowed to increase _______ the German money supply. That difference doomed the policy of aligning the pound to the Deutschmark." The blank is best filled by 
a) faster than b) more slowly than c) at the same rate as d) either a) or b) above 
3. "Then there's the state of the dollar, which has been bleeding steadily despite transfusions from borrowings and foreign reserves." Transfusions from borrowings and foreign reserves are 
a) bond sales to foreigners and Fed sales of dollars on the foreign exchange market 
b) bond sales to foreigners and Fed purchases of dollars on the foreign exchange market 
c) bond purchases from foreigners and Fed sales of dollars on the foreign exchange market 
d) bond purchases from foreigners and Fed purchases of dollars on the foreign exchange market 
4. "Furthermore, current monetary policy appears to be conducted as if we were on a fixed exchange rate. Policy is effectively geared to maintaining the exchange rate at the expense of a domestic recovery." By conducting monetary policy as if we were on a fixed exchange rate , the Fed 
a) follows the monetarist rule 
b) increases the money supply whenever we have a balance of payments deficit 
c) increases the money supply whenever we have a balance of payments surplus 
d) does not change the money supply in response to balance of payments imbalances 115 
5. "The government may be tempted to increase official currency reserves in order to reduce the pressure on the dollar and the consequent threat to manufacturing industries." What policy is being referred to here ? 
a) having the Fed raise interest rates b) having the Fed borrow reserves from the IMF 
c) having the Fed sell dollars on the foreign exchange market 
d) having the Fed buy dollars on the foreign exchange market




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