If a Central Bank Does Not Want to See Its

question 90

Multiple Choice

If a central bank does not want to see its currency ________ in value,it may pursue contractionary monetary policy to raise the domestic interest rate,thereby ________ its currency.

• A)fall;strengthening
• B)fall;weakening
• C)rise;strengthening
• D)rise;weakening

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Definitions:

Money Demand

The desire or need for holding money as opposed to investing or spending it.

Equation of Exchange

The equation of exchange is a macroeconomic formula that relates the money supply, its velocity, the price level, and an index of expenditures in an economy, typically expressed as MV = PQ.

Nominal GDP

The gross domestic product measured in current prices, without adjusting for inflation, reflecting the value of all goods and services produced.

Money Supply

The total amount of monetary assets available in an economy at a specific time, including currency, demand deposits, and other liquid instruments.