Which of the following terms is used to describe an exchange rate regime in which the rate is fixed to a currency or basket of currencies?
A. Exchange controls
B. Pegged exchange rate
C. Managed float
D. Fully convertible
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For a country which has a relatively high rate of inflation and wants some form of pegged exchange rate, which of the following exchange rate regimes is the best choice?
A. Fully fixed exchange rate
B. Adjustable peg
Crawling peg
D. Fully convertible
Which of the following mechanisms cannot be adopted by a country to defend a fixed exchange rate?
A. The government can buy or sell foreign currency in order to influence the actual exchange rate.
B. The government can allow the currency to self-adjust and the resulting market rate will be equal to the intended rate in the fixed exchange rate regime.
C. The government can impose a form of exchange control.
D. The government can alter domestic interest rates in order to influence short-term capital flows.
Consider that Britain is trying to maintain a fixed exchange rate with respect to the U.S. dollar. However, the present situation in the foreign exchange market is conducive for the British pound to depreciate with respect to the U.S. dollar. If the British government intervenes in the foreign exchange market, then it can be inferred that:
A. Britain is financing a surplus in its overall balance of payments.
B. the British money supply will rise.
C. Britain is financing a deficit in its overall balance of payments.
D. Britain is gaining official international reserves.
Consider that Britain is trying to maintain a fixed exchange rate with respect to the U.S. dollar. However, the present situation in the foreign exchange market is conducive for the British pound to depreciate with respect to the U.S. dollar. If the British government uses sterilized intervention in the foreign exchange market, then:
A. Britain is gaining official international reserves.
Britain will be running a surplus.
C. the British monetary authorities will be selling British government bonds.
D. the British monetary authorities will be buying British government bonds.