Label the following statements as true, false or uncertain, and provide explanation for your answer. (A). Under floating exchange rates it is easier to maintain internal balance than it would be if the exchange rate were fixed but more difficult to achieve external balance. (B). Because developed countries issue debt denominated in foreign currencies, they are able to reduce the burden of that debt by devaluing their currencies. (C). Similarity of economic structure, and composition of output, tends to reduce the economic stability loss from joining a currency union. (D). A current account deficit (CA < 0) implies two things: absorption is more than national income (A > Y) and national saving is less than investment spending (S < I).
Label the following statements as true, false or uncertain, and provide explanation for your answer.
(A). Under floating exchange rates it is easier to maintain internal balance than it would be if the exchange rate were fixed but more difficult to achieve external balance.
(B). Because developed countries issue debt denominated in foreign currencies, they are able to reduce the burden of that debt by devaluing their currencies.
(C). Similarity of economic structure, and composition of output, tends to reduce the economic stability loss from joining a currency union.
(D). A current account deficit (CA < 0) implies two things: absorption is more than
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