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.

---

Definitions:

Monopolist

An entity that is the sole provider of a particular product or service in the market, facing no direct competition.

Quantity Effect

The impact on total revenue or expenditure when the quantity sold of a good or service changes, holding its price constant.

Motor Homes

Recreational vehicles equipped with living quarters and amenities found in a home, used for traveling or camping.

Retailing

Retailing refers to the selling of goods and services directly to consumers for personal, non-business use.