21 if currency traders expect the dollar to depreciate What

21) if currency traders expect the dollar to depreciate. What will be the impact on demand and supply of dollars in the foreign exchange market?

A) Demand for the dollar will decline, and the supply of the dollar will increase.

B) Demand for the dollar will increase, and the supply of the dollar will decline.

C) Demand for the dollar will increase, and the supply of the dollar will increase.

D) Demand for the dollar will decline, and the supply of the dollar will decline.

22) Monetary policy refers to actions:

A) Central bank to manage money supply and interest rates to achieve macroeconomic policy objectives.

B) Head of State to manage government expenditure and taxes to achieve economic objectives.

C) Central Bank to manage government expenditure and taxes to achieve economic objectives.

D) Head of State to manage money supply and interest rates to achieve economic objectives.

24) Which of the following will encourage (encourage) the government to pursue an expansionary fiscal policy?

A) An increase in consumer spending.

B) Increase in net exports.

C) A decline in private investment spending.

D) Low oil prices.

25) Which of the following operations can be included in the country balance of payments financial account?

A) A Qatari buys an American car.

B) An American buys an American car.

C) A Qatari buys shares and bonds from the United States.

D) Remittances of Egyptians working in Qatar.

Solution

21) A is correct

When traders expect dollars to depreciate, traders invest less in dollar as their return is likely to fall. This reduces the demand for dollars. Supply of dollars will increase as US goods are cheaper now which increases exports.

22) A is correct

Monetary policy is the management old money supply and interest rate by central bank to maintain equilibrium in the economy.

24) C is correct

A decline private investment spending results in lower output equilibrium in the economy. To compensate the decline government increases spending to keep the economy output unchanged.

25) C is correct

Transactions related to ownership of capital assets with foreign countries are included in financial account, Transactio like purchase and sale of stocks and bonds.