Identify two factors (or characteristics of economy) that underlie a nation’s decision to adopt a fixed exchange rate or a floating exchange rate.
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Identify two factors (or characteristics of economy) that underlie a nation’s decision to adopt a fixed exchange rate or a floating exchange rate.
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- Who would demand U.S. dollars in the foreign exchange market? U.S. firms and households wishing to purchase foreign goods and services Foreigners wishing to purchase U.S goods and services U.S. households wishing to purchase U.S. goods and servicesCompare and contrast the fixed, freely floating, and managed float exchange rate systems. What are some advantages and disadvantages of a freely floating exchange rate system versus a fixed exchange rate system?Is a country for which imports and exports comprise a large fraction of the GDP more likely to adopt a flexible exchange rate or a fixed (hard peg) exchange rate?
- Compare the effects of monetary and fiscal policies (i.e. strengthened or weakened) to maintain internal balance(s) of an open economy under fixed and floating exchange rate regimes.Explain why a decline in a country's exchange rate will generally increase the demand for its goods and reduce its demand for foreign goods.Contrast the effects of having a fixed versus a floating exchange rate for a country’s economy
- Discuss three factors that would impact the values of the major currencies in foreign exchangeWhich of the following affects the demand for U.S. dollars in the foreign exchange market? Multiple Choice domestic demand for U.S. stocks domestic demand for U.S.-made cars foreign demand for U.S. exports European demand for eurosIn 1961, Charles de Gaulle decided he did not want the French franc to be considered as a second-rate currency, so he chopped two zeros off the value of the franc, which meant the exchange rate was approximately FF5/$ instead of FF500/$ (he also ordered that the $ key on IBM punchcard machines be replaced by the FF symbol). This had no immediate impact on any domestic or international transactions, but was supposed to convince the French people to put inflation behind them and keep their currency in line with the Dmark and the British pound. Whether or not this change in currency values made any difference, the relative inflation rate did slow down and the value of the FF did rise relative to the dollar over the next two decades. At the same time, the current account balance improved slightly. Based on these factors, explain what happened to the growth rate, show how the NX and NFI curves must have shifted, and describe the underlying economic developments.
- An appreciation of the dollar against all currencies in the foreign exchange market would result in all of the following, except: a) a decrease in the dollar prices paid by U.S. importers. b) an increase in the cost of vacations in Florida for Japanese tourists. c) foreign holidays for U.S. residents to be less expensive. d) an increase in the foreign currency prices paid for U.S. exports. e) an increase in the demand for U.S. exports.What is the current (within the last 48 hours) exchange rate between the U.S. dollar and the Chinese Yuan?What are the benefits of having a fixed exchange rate?