Question: True or False: Mexico can simultaneously peg the peso to the euro as well as the U.S. dollar. The yield offered on government bonds in
- True or False: Mexico can simultaneously peg the peso to the euro as well as the U.S. dollar.
- The yield offered on government bonds in different countries in the eurozone (Are/Aren't) always the same, due to the presence of (Credit Risk / Exchange rate risk).
3. Suppose that the U.S. Federal Reserve wishes to influence the value of the dollar to decrease inflation.
If the Fed uses direct intervention to achieve this goal, it will seek to (Weaken/Strenghten) the dollar. In doing so, this direct intervention may very well (Decrease / Increase) unemployment since demand for domestically produced goods may (Decrease/Increase).
4. Suppose the Fed wants to strengthen the dollar by using indirect intervention.
To accomplish this goal, the Fed could (Decrease/Increase) interest rates in the U.S. This would (Decrease/Increase) the supply of other currencies (in exchange for dollars), thereby (Lowering/Raising) the value of the dollar relative to the other currencies.
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