Financial Markets and Institutions (2-downloads)

8. How can a large balance-of-payments surplus con-

tribute to the country’s inflation rate?

9. “If a country wants to keep its exchange rate from

changing, it must give up some control over its money

supply.” Is this statement true, false, or uncertain?

Explain your answer.

10. Why can balance-of-payments deficits force some coun-

tries to implement a contractionary monetary policy?

11. “Balance-of-payments deficits always cause a country

to lose international reserves.” Is this statement true,

false, or uncertain? Explain your answer.