Question: Determine if the following statements are TRUE or FALSE. Explain your answer if FALSE. a. Monetary authorities can only accumulate foreign exchange reserves if their

Determine if the following statements are TRUE or FALSE. Explain your answer if FALSE.

a. Monetary authorities can only accumulate foreign exchange reserves if their countries run current account surpluses. (2 points)

b. If assets are perfect substitutes, it is irrelevant whether central banks intervene in the open market with domestic or foreign assets. (2 points)

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