Which of the following statements is false?
A) Unsterilized intervention uses the foreign exchange reserves to offset payments imbalances,consequently changing the domestic money supply.
B) If private capital is mobile, central banks must defend exchange rates by buying and selling foreign exchange reserves.
C) Sterilized intervention does not work when there is perfect capital mobility, because offsetting capital flows are immediately induced.
D) Monetary policy in an open economy with fixed exchange rate is ineffective to fight recession.

Question

Quizplus · Accepted Answer

The Answer of Which of the following statements is false?
A) Unsterilized intervention uses the foreign exchange reserves to offset payments imbalances,consequently changing the domestic money supply.
B) If private capital is mobile, central banks must defend exchange rates by buying and selling foreign exchange reserves.
C) Sterilized intervention does not work when there is perfect capital mobility, because offsetting capital flows are immediately induced.
D) Monetary policy in an open economy with fixed exchange rate is ineffective to fight recession.

Which of the Following Statements Is False