Question:
Choose the correct statement(s) for an open economy:
A. Sterilisation implies nullifying the impact of foreign exchange transactions on domestic money supply.
B. In a sterilized intervention in the foreign exchange market by the central bank, a purchase of foreign assets should be matched by a sale of domestic assets.
C. In an open economy with fixed exchange rates and perfect capital mobility, the central bank can pursue independent monetary policy.
D. Sterilised intervention with perfect asset substitutability under fixed exchange rate allows the exchange rate to depreciate.
E. Real exchange rate can change only due to changes in nominal exchange rate.
Choose the correct answer from the options given below:
Choose the correct statement(s) for an open economy:
A. Sterilisation implies nullifying the impact of foreign exchange transactions on domestic money supply.
B. In a sterilized intervention in the foreign exchange market by the central bank, a purchase of foreign assets should be matched by a sale of domestic assets.
C. In an open economy with fixed exchange rates and perfect capital mobility, the central bank can pursue independent monetary policy.
D. Sterilised intervention with perfect asset substitutability under fixed exchange rate allows the exchange rate to depreciate.
E. Real exchange rate can change only due to changes in nominal exchange rate.
Choose the correct answer from the options given below:
A. Sterilisation implies nullifying the impact of foreign exchange transactions on domestic money supply.
B. In a sterilized intervention in the foreign exchange market by the central bank, a purchase of foreign assets should be matched by a sale of domestic assets.
C. In an open economy with fixed exchange rates and perfect capital mobility, the central bank can pursue independent monetary policy.
D. Sterilised intervention with perfect asset substitutability under fixed exchange rate allows the exchange rate to depreciate.
E. Real exchange rate can change only due to changes in nominal exchange rate.
Choose the correct answer from the options given below:
Updated On: Mar 11, 2024
- C and D only
- C, B and E only
- A and B only
- B, C and D only
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The Correct Option is C
Solution and Explanation
The correct option is(C): A and B only
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