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.

---

Definitions:

Performance

In contract law, it refers to the act of doing what is required by a contract.

Novation

The act of replacing an original party in a contract with a new party, with the consent of all involved, effectively creating a new contract.

Previous Valid Obligation

A duty or commitment that has been legally recognized and must be fulfilled as previously agreed or contracted.

Novation

The act of replacing an old obligation with a new one, thereby extinguishing the original obligation.