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10 Cards in this Set

  • Front
  • Back
When the return on dollar deposits is high relative to the return on foreign deposits, there is a:
Higher demand for dollar deposits.
When foreign interest rates increase and everything else is held constant, what happens to the demand curve for foreign assets and the domestic currency?
The demand curve for foreign assets shifts to the left

The domestic currency depreciates.
A sterilized intervention with the foreign exchange rate does not affect what?
The money supply and the monetary base.
In the foreign exchange market, if the exchange rate is expected to increase in the future, holding everything else constant, what happens to the dollar?
It appreciates.
A decrease in the domestic interest rate causes the demand for domestic assets to _____ and the domestic currency to _____ when everything else is held constant.
Decrease; depreciate
Unsterilized exchange rate intervention
Accomplished by the purchasing/ selling of domestic currency in the foreign market.

Changes the Money Supply
An unsterilized intervention in which domestic currency is purchased by selling assets leads to what?
An appreciation of the domestic currency.
When a central bank buys its currency in the foreign exchange market, the money supply will ____.
Decrease
According to Tobin's theory of q, when prices are low the market price of existing capital is cheap relative to new capital, so expenditure on fixed investment is _____.
Low
An expansionary monetary policy causes a ______ in net worth.
Rise