What should be the impact on the U.S. interest rates if the Fed undertakes a sterilized foreign exchange intervention? Be sure to explain your answer.
What will be an ideal response?
A sterilized foreign exchange intervention is designed to alter the asset side of the Fed's balance sheet but to leave the monetary base unchanged. For example, the Fed could purchase euros (sell dollars) which itself would raise reserves. But as the Fed does this it could also sell U.S. Treasury securities to reduce reserves, thereby not altering the reserves (monetary base). If the monetary base is not altered the domestic interest rates should remain the same.
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Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Based on these data,
A) Cindy has a comparative advantage at producing tacos. B) Scott has a comparative advantage at producing tacos. C) Cindy and Scott have the same comparative advantage in producing tacos. D) neither Cindy nor Scott has a comparative advantage in producing tacos. E) Cindy and Scott have the same comparative advantage in producing pizzas.
In deciding which model of a car to buy, microeconomic theory maintains that consumers are concerned about the absolute price of a particular car, rather than its relative price
Indicate whether the statement is true or false