Monetary theory and practice multiple choice questions

If the exchange rate is above equilibrium level then in a floating exchange rate system:

Select one:

There is excess supply and the exchange rate should fall.

There is excess demand and the exchange rate should fall.

There is excess supply and the exchange rate should rise.

There is excess demand and the exchange rate should rise.

Which of the following will increase commercial bank reserves?

Select one:

An increase in the discount rate.

The sale of government bonds in the open market by Central bank.

The purchase of government bonds in the open market by the Central Bank.

A decrease in the reserve ratio.

An appreciation of the currency is likely to occur if:

Select one:

There is an increase in demand for exports.

Domestic interest rates fall.

There is an increase in the balance of payments deficit.

There is an increase in demand for imports.

If the value of the Kenya shilling in other currencies is strong, then other things being equal:

Select one:

The price of Kenyan products abroad in foreign currency will fall.

The price of Kenyan products abroad in foreign currency will rise.

The price of Kenyan products in Kenya will rise.

The price of Kenyan products in Kenya will rise.

According to the Fisher equation of exchange, an increase in themoney supplyis most likely to lead to inflation if:

Select one:

There is deflation

The velocity of circulation and the number of transactions is constant.

The velocity of circulation decreases.

The number of transactions decreases.

If there were a balance of payments deficit then in a floating exchange rate system:

Select one:

The external value of the currency would tend to fall.

Aggregate demand is increasing

The external value of the currency would tend to rise.

The injections from trade are greater than the withdrawals.

The group that sets themonetary policyon buying and selling government securities is the:

Select one:

A.Council of Economic Advisers.

B.Treasury advisory council.

C.Consumer Advisory council.

D.Monetary policycommittee.