Q1. The Federal Reserve has determined that, although the yen/USD exchange rate is volatile, its equilibrium value is approximately 105 yen/USD. The Fed has decided to intervene in foreign exchange markets to keep the exchange rate in a fairly narrow band around 105 yen/USD. If the exchange rate rises above 110 yen what should the Fed do? If the exchange rate falls below 100 yen what action should the Fed take? Rise above 110 yen/USD Fall below 100 yen/USD
A) Buy dollars Sell dollars B) Sell dollars Buy dollars C) Buy dollars No action
Q2. During a recent staff meeting at LeBoeff Financial Capital Inc., Joe Hardy asked the firm’s in-house economist, Robin Heathers, to provide a discussion of the Federal Reserve’s intervention in the foreign exchange markets. At the meeting, Heathers made the following statements: Statement 1: If the equilibrium dollar-rial exchange rate fluctuates between 150 rial/USD and 180 rial/USD and on average is 165 rial/USD, then the U.S. Fed can reduce exchange rate volatility by buying rials when the rate moves above 175 and selling rials for dollars when the rate moves below 155. Statement 2: If the average equilibrium exchange rate moves from 165 rial/USD to 175 rial/USD, the U.S. Fed can intervene in the currency markets to return the equilibrium rate to 165. With respect to these statements: A) only one is correct. B) both are incorrect. C) both are correct.
Q3. The most likely reason that a central bank would intervene in foreign exchange markets is to: A) keep the value of the domestic currency high to promote foreign investment. B) reduce exchange rate volatility. C) peg the exchange rate at the optimal level.
Q4. The benefit of a crawling-peg policy for exchange rates relative to a fixed-rate policy is reduction of risk: A) in the currency markets. B) that changes in the inflation rate will cause exchange rates to fluctuate. C) of the government running out of foreign currency.
| 
发表于 2009-1-13 11:22
| 
