6. If the Fed desires to weaken the dollar without affecting the dollar money su

Question

6. If the Fed desires to weaken the dollar without affecting the dollar money supply, it should: a. exchange dollars for foreign currencies, and sell some of its existing Treasury b. exchange toreign currencies for dollars, and sell some of its existing Treasury c. exchange dollars for foreign currencies, and buy existing Treasury securities with security holdings for dollars. security holdings for dollars. dollars. d. exchange foreign currencies for dollars, and buy existing Treasury securities with An example of indirect intervention by the Bank of Japan would be for the Bank of Japan to use interest rates to increase the value of the yen vs. the dollar. a. True b. False 8. A central bank may attempt to stimulate a stagnant economy by weakening the value of the currency a. True b. False 9. Assume that the dollar has been consistently depreciating over a long period. The Fed decides to counteract this movement by intervening in the foreign exchange market using sterilized intervention. The Fed would a. buy dollars with foreign currency and simultaneously sell Treasury securities for b. buy dollars with foreign currency and simultaneously buy Treasury securities with c. sell dollars for foreign currency and simultaneously sell Treasury securities for d. sell dollars for foreign currency and simultaneously buy Treasury securities with e. none of the above dollars dollars dollars dollars 10. Assume the bid rate of a New Zealand dollar is $.33 while the ask rate is $.335 at Bank X. Assume the bid rate of the New Zealand dollar is $.32 while the ask rate is $.325 at Bank Y. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the $1,000,000 you started with? a. $15,385.

Explanation / Answer

6) The asnwer is A-) exchange dollars for foreign currencies, and sell some of its existing Treasury security holdings for dollars.

because , when fed desires to weaken dollar and strength the foreign currency without affecting the dollar money supply then it exchanges dollars for foreign currency and sell some its existing Treasury as a result , the net effect is an increase in investor's holding of treasury securities and a decrease in bank foreing currency balances.

7) The asnwer is A -)True.

8) The asnwer is A -) True.

9) The asnwer is B-) buy dollars with foreign currency and simultaneously buy Treasury securities with dollars.

Related Questions

Navigate

• Browse (All)
• Browse 6
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.