Under an exchange-rate targeting rule for monetary policy, a crawling peg
A) fixes the value of the domestic currency to a commodity such as gold.
B) fixes the value of the domestic currency to that of a large, low-inflation country.
C) allows the domestic currency to depreciate at a steady rate so that inflation in the pegging country can be higher than that of the anchor country.
D) allows the domestic currency to depreciate at a steady rate so that inflation in the pegging country can be lower than that of the anchor country.
C
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A decline in interest rates tends to expand the economy by
a. encouraging private investment and decrease in bank lending. b. appreciating the currency and lowering the profitability criterion for investments. c. decreasing the cost of capital and reducing net exports. d. depreciating the currency and raising net exports.
Suppose there is a decrease in short-run aggregate supply. If the Federal Reserve wants to stabilize output it should
a. buy bonds. These purchases also move the price level closer to its original level. b. buy bonds. However these purchases move the price level farther from its original level. c. sell bonds. These purchases also move the price level closer to its original level. d. sell bonds. However these purchase move the price level farther from its original level.