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Questions › CUET-PG › CUET-PG 2023 Shift 2 › Q45
4 marks, −1International Economics › Open-economy macroeconomics › Policy under fixed exchange ratesHardabout 2 min

CUET-PG 2023 Shift 2 Question 45: Open-economy macroeconomics

Choose the correct statement(s) for an open economy: (A) Sterilisation implies nullifying the impact of foreign exchange transactions on domestic money supply. (B) In a sterilized intervention in the foreign exchange market by the central bank, a purchase of foreign assets should be matched by a sale of domestic assets. (C) In an open economy with fixed exchange rates and perfect capital mobility, the central bank can pursue independent monetary policy. (D) Sterilised intervention with perfect asset substitutability under fixed exchange rate allows the exchange rate to depreciate. (E) Real exchange rate can change only due to changes in nominal exchange rate. Choose the correct answer from the options given below:

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Answer and worked solution

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Open-economy macroeconomics has come up 55 times in 7 exams since 2006.

What this question tests

This question is on Policy under fixed exchange rates, part of Open-economy macroeconomics in International Economics.

What monetary and fiscal policy can do when the central bank holds the exchange rate.

TestStop has 13 past-paper questions on this subtopic.

Take this paper as a timed mockMore on Policy under fixed exchange rates

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Question from the CUET-PG 2023 Shift 2 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.