13. “Our international reserves fell by $330 million to $3.2 billion last month – not much ammunition if the going gets tough.” What is happening here?a) there is a balance of payments deficit and the...

13. “Our international reserves fell by $330 million to $3.2 billion last month – not much ammunition if the going gets tough.” What is happening here?a) there is a balance of payments deficit and the Fed is trying to prevent a rise in the exchange rateb) there is a balance of payments deficit and the Fed is trying to prevent a fall in the exchange ratec) there is a balance of payments surplus and the Fed is trying to prevent a rise in the exchange rated) there is a balance of payments surplus and the Fed is trying to prevent a fall in the exchange rate14. “The two-pronged attack – raising interest rates to attract liquid capital into the country and using foreign currency holdings to sop up unwanted dollars – has been designed to ……” This clipping is best completed witha) prevent a fall in the dollar b) prevent a rise in the dollarc) increase the money supply d) deal with a balance of payments surplus15. “These are the extreme positions. The Bank of Canada’s actual path is somewhere in the middle. Some of the brunt of higher U.S. interest rates is taken in higher domestic rates, some through a lower-valued Canadian dollar and some through a loss of international reserves.” The upshot of all this is a Canadian balance of payments deficit that isa) being allowed to continue b) zero because of a lower Canadian dollar c) zero because of higher Canadian interest ratesd) zero because of a combination of higher interest rates and a lower dollar