Suppose Policy Makers Are Pursuing a Policy to Fix the Exchange

question 15

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 sale 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 gradual reduction in the domestic interest rate.
• D)a change in the composition of the monetary base.

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Definitions:

Observing Models

The process of learning behaviors, attitudes, and emotional reactions through watching others, especially influential or authority figures.

Consequences

The outcomes or effects that follow from an action, behavior, or decision, influencing future choices and behaviors.

Reinforced Behavior

Behavior that is strengthened and likely to be repeated due to the application of reinforcement.

Rewards

Benefits, physical or psychological, given in response to actions deemed desirable, which serve to reinforce those actions.