IMF02

What is an expansionary open market operation (OMO)?

• Central bank buys domestic bonds from public.

• Central bank sells domestic bonds to public.

• Central bank buys foreign bonds from public.

• Central bank sells foreign bonds to public.

Which statement regarding contractionary FXO is correct?

• Central bank buys domestic bonds from public.

• Domestic money supply increases

• Domestic currency depreciates

• Domestic currency appreciates

Which statement regarding sterilized foreign exchange operation (SFXO) is correct?

• Increase monetary base

• Exchange of already existing domestic monetary base for domestic bonds.

• No effect on the monetary base, interest rate, and exchange rate.

Considering zero-coupon bond, which statement is correct?

• If the interest rate increases. the price of the bond increases, the demand for the bond increases.

• If the interest rate increases. the price of the bond decreases, the demand for the bond increases.

• If the interest rate increases. the price of the bond decreases, the demand for the bond decreases.

• If the interest rate decreases. the price of the bond decreases, the demand for the bond increases.

The portfolio balance model focuses on both short-run and long-run adjustment.

• True

• False

What is the primary focus of the portfolio balance model?

• Fiscal policy

• Exchange rates

• Trade balances

In the portfolio balance model, what asset is considered a substitute for money?

• Corporate bonds

• Government bonds

• Real estate