Question

Question: Typically in the domestic country, a sterilized purchase of foreign assets has no affect on the exchange rates, this is because money supply does not change when both countries' bonds are perfect substitutes. However, when assets are imperfect substitutes, sterilized purchase of foreign assets will now increase money supply, but exchange rates quotes as domestic per foreign will stay the same if the domestic asset sold comes with greater risk. 4 out of 6 of my bolded answers are correct, please assist me with the correct answers. Thank you

          Question:
Typically in the domestic country, a sterilized purchase of foreign assets has no affect on the exchange
rates, this is because money supply does not change when both countries' bonds are perfect
substitutes. However, when assets are imperfect substitutes, sterilized purchase of foreign assets will
now increase money supply, but exchange rates quotes as domestic per foreign will stay the same if
the domestic asset sold comes with greater risk.
4 out of 6 of my bolded answers are correct, please assist me with the correct answers. Thank
you

Question:
Typically in the domestic country, a sterilized purchase of foreign assets has no affect on the exchange
rates, this is because money supply does not change when both countries' bonds are perfect
substitutes. However, when assets are imperfect substitutes, sterilized purchase of foreign assets will
now increase money supply, but exchange rates quotes as domestic per foreign will stay the same if
the domestic asset sold comes with greater risk.
4 out of 6 of my bolded answers are correct, please assist me with the correct answers. Thank
you

Added by Jeffrey M.

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