There Are Limits to the Ability of Monetary Authorities to Use

question 1

Multiple Choice

There are limits to the ability of monetary authorities to use sterilized intervention in the case of a deficit because:

• A)the central bank may be unwilling to increase its holdings of foreign currency beyond a certain limit.
• B)the pressure from foreign countries to allow the domestic currency to appreciate will lead to large losses.
• C)the central bank's ability to constantly obtain foreign currency for the sterilized intervention is constrained.
• D)the export level is fixed and it cannot be allowed to drop.

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Definitions:

Common Information Effect

A group decision-making bias where shared information is given more importance than unshared or unique information during discussions.

Unique Information

Refers to data or insights that are not commonly known or widely distributed.

Information

Data, facts, or insights provided or learned about something or someone, which can be used for a variety of purposes including decision-making and understanding contexts.

Transactive Problem-solving

A collaborative approach to problem-solving where team members build on each other's knowledge and ideas.