POP-QUIZ TOPIC 6

What are the role of Central Bank in currency value?

• Controlling Money Supply

• Setting interest rates

• Managing inflation

• buy or sell foreign exchange reserves to stabilize it.

• All is correct

Fiat money is a type of currency that is not backed by any commodity like

What is fixed exchange rate system?

• Exchange rate that held constant or fluctuate within very narrow boundaries

• Exchange rate that determine by demand and supply

• Exchange rate that allows some government intervention

• Exchange rate that replace their own currency with dollar.

The government will still allow market forces to determine the exchange rate, but it sets a certain band in which they must allow their currency to fluctuate in.

Above statement refer to which type of exchange rate system?

• Free-floating exchange rate system

• Fixed exchange rate system

• Managed exchange rate system

• Target zone arrangement

Ecuador abundant it currency and replace their currency with

■When BNM wish to strengthen RM against dollar, BNM will sell dollar and buy more RM from the foreign exchange market.

• True

• False

•1The central bank buys foreign currency (e.g., USD) to weaken the local currency.

•This increases domestic money supply, but the central bank sells bonds to absorb excess liquidity, preventing inflation.

This action is know as

• Sterilized Intervention

• non-sterilized intervention

• indirect intervention

Malaysia economic growth will increase when Bank Negara use RM reserve to buy foreign currency

• TRUE

• FALSE