Suppose Policy Makers Are Pursuing a Policy to Fix the Exchange

question 70

Multiple Choice

Suppose policy makers are pursuing a policy to fix the exchange rate.In such a system with perfect capital mobility,an open market purchase of domestic bonds by the domestic central bank will eventually result in

• A)a permanent increase in the monetary base.
• B)a permanent reduction in the monetary base.
• C)a change in the composition of the monetary base.
• D)a gradual reduction in the domestic interest rate.

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Definitions:

Acetaldehyde

A volatile, colorless, and flammable liquid organic compound, used as an intermediate in the synthesis of various chemicals.

3-Methylthiopropanal

An organic compound characterized by a three-carbon aldehyde functional group attached to a sulfur atom-containing methyl group.

Methionine

An essential amino acid that plays a role in many cellular processes, such as initiating protein synthesis and being a source of sulfur.

L-Phenylalanine

An essential amino acid with a phenyl group, required for various processes in the body and a precursor to neurotransmitters and proteins.