If your economy is off the internal and external balance as point 2, you want to reach the internal and external balance of point 1 in the following graph. How you can achieve this goal in the fixed exchange rate regime? Exchange rate, E

If your economy is off the internal and external balance as point 2, you want to reach the internal and external balance of point 1 in the following graph. How you can achieve this goal in the fixed exchange rate regime? Exchange rate, E

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: The graph shows the demand curve for U.S. dollars. Draw a new demand curve that shows the effect of…

A: The relationship between the cost of an item or service and the quantity demanded over a specific…

Q: How does the government intervene in the fixed exchange rate to keep it stable? Explain your answer…

A: Fixed exchange rate A fixed exchange rate is a type of exchange rate system in which a monetary…

Q: based on the table above, is the exchange rate of dollars to pounds fixed or flexible? Explain

A: The exchange rate between the United States dollar (USD) and the British pound (GBP) is a dynamic…

Q: What is one of the ways governments can influence exchange rates?

A: the government uses the exchange rate tool to achieve multiple objectives such as full employments,…

Q: What is the effect of changing interest rates on the exchange rate? Be explicit in your answer.

A: The exchange rate has the most direct impact on the real economy through changes in demand for…

Q: Ad Ad The following question focuses on the exchange rate between Mexican pesos and U.S. dollars,…

A: The value of a country's currency in terms of some other country's currency is reffered to be as…

Q: A country with fixed exchange rate can always raise its policy interest rate to curb down…

A: Exchange rate:- Exchange rates between different currencies indicate how strong one currency is…

Q: Suppose that the Federal Reserve cannot convince the public of its commitment to fight inflation in…

A: The movement of currency from one country to another country through exchange is called the exchange…

Q: 1.1 What is the difference between the nominal exchange rate and the real exchange rate? When a…

A: The foreign exchange rate is a rate at which one country's currency is exchanged for another…

Q: Please list and explain in your own words the benefits and costs when a country adopts a flexible…

A: The currency regime in which the exchange rate is set by the market forces of demand and supply of a…

Q: Provide an example of a direct quote of an exchange rate

A: In the foreign exchange market, a direct quote is a rate quotation. It compares the value of one…

Q: What are the determinants of exchange rates? Do interstate rate differentials have an impact on…

A: Macroeconomics refers to the branch of economics that deals with the with performance, structure,…

Q: What effect does a high exchange rate have on imports, exports, and that country's production?

A: The rate that measures the value of a nation’s currency in terms of another nation’s currency is…

Question

If your economy is off the internal and external balance as point 2, you want to reach the internal and
external balance of point 1 in the following graph. How you can achieve this goal in the fixed exchange
rate regime?
Exchange
rate, E
Devaluation
that results
in internal
and external
balance
Spending increase
that results in internal
and external balance
XX
Domestic
spending, A

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define exchange rate

VIEW

Step 2: Explain how the goal can be achieved

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Assume that Canada has a fixed exchange rate regime. Explain the effect on the foreign exchange market if there is a decrease in foreign income. What will the Bank of Canada do to maintain the fixed exchange rate?
Please list and explain in your own words the benefits and costs when a country adopts a flexible exchange rate regime; Also the benefits and costs when a country adopts a fixed exchange rate regime.
What problems result from government attempts to stabilize the exchange rate at a level that is not the equilibrium level?
This is all one question, please answer everything! Explain how each of the below affect Sweden's balance of payments. Please choose the correct answer between the options presented: Oil exports to the rest of the world decreased due to stay at home orders: current account moves toward (surplus/current) account moves toward (deficit/capital) (financial) account moves toward (surplus/capital) (financial) account moves toward deficit Due to Brexit, Sweden imports of British goods decreases: current account moves toward (surplus/current) account moves toward (deficit/capital) (financial) account moves toward (surplus/capital) (financial) account moves toward deficit Swedish laborers working outside of Europe see a decrease in their incomes, and thus there is a decrease in remittances: current account moves toward (surplus/current) account moves toward (deficit/capital) (financial) account moves toward (surplus/capital) (financial) account moves toward deficit Fewer Swedans travel outside…
The following paragraphs discuss the impact of various economic events on the exchange rate. Complete the paragraphs by filling in the blanks. Use any of the words from the following list (you can use each of these words as many times as you wish): demandsupplyleftrightbuysellimportsexportsrisefallincreasesdecreases What happens to the exchange rate when the current account balance falls?A falling current account balance means that the value of ____ are rising relative to _____. Let's assume that one does rise and one does fall to cause the current account balance to fall. _____ affects the ____ for/of $NZ so a decline in this means ____ for/of $NZ shifts left. _____ affects the Answer for/of $NZ so a rise in this means _____ for/of $NZ to shift right. The combined effect from the fall in the current account balance is that we expect the value of the $NZ to ____. What happens to the exchange rate when New Zealand interest rates fall relative to the rest of the world?A fall in NZ…
We noted that in 1900, the fixed exchange rate between the British pound and the U.S. dollar was 1 pound equals $5. What is the exchange rate today? Whose currency has gained the most in purchasing power? What caused this dramatic change in the exchange rate?
Suppose purchasing power parity is true. What happens to the nominal exchange rate if the price of domestically produced goods (in terms of domestic currency) rises? What happens to the real exchange rate?
The following paragraphs discuss the impact of various economic events on the exchange rate. Complete the paragraphs by filling in the blanks. Use any of the words from the following list (you can use each of these words as many times as you wish but choose carefully - your sentence must make grammatical sense):demand supply left right buy sell imports exports rise fall increases decreases What happens to the current account balance and the exchange rate when the following happens? Suppose that New Zealand firms become more profitable relative to foreign firms and so increase their payment of dividends (everything else held constant). The value for net foreign income therefore ________ and the value of the current account balance will _______. Payment of NZ dividends to foreign owners affects the _______ or/of $NZ while payments of foreign dividends to NZ owners of foreign companies affects the _______ for/of $NZ. Therefore the impact of the change in profit of NZ firms is…
When you write an exchange rate in terms of how many units of a foreign currency it takes to buy one US dollar, we call that: a)a direct quote b) the real price c) an indirect quote d) a depreciation
The following paragraphs discuss the impact of various economic events on the exchange rate. Complete the paragraphs by filling in the blanks. Use any of the words from the following list (you can use each of these words as many times as you wish): demandsupplyleftrightbuysellimportsexportsrisefallincreasesdecreases What happens to the exchange rate when the current account balance falls?A falling current account balance means that the value of ____(1) are rising relative to _____(2). Let's assume that one does rise and one does fall to cause the current account balance to fall. _____(3) affects the ____(4) for/of $NZ so a decline in this means ____(5) for/of $NZ shifts left. _____(6) affects the _____(7) for/of $NZ so a rise in this means _____ (8)for/of $NZ to shift right. The combined effect from the fall in the current account balance is that we expect the value of the $NZ to ____(9). What happens to the exchange rate when New Zealand interest rates fall relative to the rest…
How can a country fix its exchange rate to another? Is it sustainable for them to maintain it fixed?
The autonomous region of Catalonia has recently declared independence from Spain, and is looking for an exchange rate policy that would best fit their needs. The Catalans’ main goal is to stabilise the price level in the long-run, but constantly experience fluctuations in the price of foreign goods imported from Spain and other European countries. Would it be better for the Catalans to fix the exchange rate against the Euro, or to adopt a floating exchange rate? Justify your answer briefly.