Question

Fully sterilized intervention by the Central Bank at the time of capital inflows leads to which of the following changes in Central Bank Balance Sheet?

• A. Rise in net foreign assets and decline in domestic assets
• B. Decline in net foreign assets and rise in domestic assets
• C. Rise in both net foreign assets and domestic assets
• D. Decline in both net foreign assets and domestic assets

Answer 1

Answer: (A)

Rise in net foreign assets and decline in domestic assets

Answer 2

The correct answer is (A) : Rise in net foreign assets and decline in domestic assets.