There Are Limits to the Ability of Monetary Authorities to Use

question 6

Multiple Choice

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

• A)the central bank may be unwilling to increase its holdings of foreign currency.
• B)the pressure from foreign countries to allow the domestic currency to depreciate 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:

Crisis

A critical or tumultuous situation that requires immediate attention and action to manage and mitigate its effects.

Ego Defense

Psychological strategies deployed by the individual to manage stress, conflict, and inner turmoil, preserving self-esteem.

Identity States

Psychological conditions representing different understandings and degrees of personal identity development.

Moratorium

Identity status, described by Marcia, in which a person is currently considering alternatives (in crisis) and seems headed for commitment.