1) Direct Intervention. How can the central bank utilize direct intervention to change value of a currency? Describe why a central bank may wish to smooth exchange rate movements of its currency.
2) Indirect Intervention. How can the central bank utilize indirect intervention to change value of the currency?
3) Sterilized Intervention. Explain the difference between sterilized and non sterilized intervention.
4) It has been argued that exchange rate can be utilized as a policy tool. Suppose that U.S. government would like to decrease unemployment. Which of the given is suitable action given this scenario? Describe your answer.
a) Weaken the dollar
b) Strengthen the dollar
c) Buy dollars with foreign currency in foreign exchange market
d) Implement a tight monetary policy.