Refer to Table 4.2. In which scenario does the interest parity condition hold?

Which of the following is an asset of the Fed?

A) Mortgage-backed securities B) currency C) reserves of depository institutions D) Both answers B and C are correct.

In the above figure, the economy is initially at point B. If the Fed increases the quantity of money, there is

A) a movement to point C. B) a movement to point A. C) a shift to AD2. D) a shift to AD1.