One of the oldest debates in economics is whether a currency should have a fixed or floating exchange rate. There is no single solution that fits all economies. The choice of an exchange rate system depends on many factors, including the openness to international trade, maturity of the financial system, inflation, labor market flexibility, and credibility of policy makers. Consider two countries, Opland and Lovenia. Opland has a central bank with a weak reputation. Lovenia has a strong central bank but much higher inflation than its trading partners. Indicate the exchange rate system that would be more beneficial for each country in the following table. Country Pegged (Fixed) Exchange Rates Flexible Exchange Rates Opland Lovenia

Q: Please help with a discussion on question #2. The base country is Nevis and the countries trading to…

A: In the simulation of our MNC based in Nevis, which trades with Australia, Colombia, and Germany, it…

Q: Explain the differences and similarities between Forward, Futures, and Options. Then why can there…

A: The key differences between forwards, futures, and options are as follows: 1. Forward contracts…

Q: Description A system in which exchange rates are held constant A system in which exchange rates are…

A: In the context of foreign exchange market exchange rate is the rate at which currency of one country…

Q: If a country is having its currency pegged to the U.S. dollar (hard peg), and the confidence in the…

A: To defend its fixed rate against the dollar, the central bank should dip into its international…

Q: flexible exchange rates. Assume the economy is initially at full employment. a)  Suppose a…

A: AA-DD  model describe with the diagram the consist of the two curves the asset which represent the…

Q: A country experiencing high inflation would be more likely to intervene to strengthen its currency…

A: Approach to solving the question:Rational Detailed explanation:High inflation in a country is a…

Q: Explain why you agree or disagree with each of the following statements: i)        “A nation’s…

A: Currency appreciation refers to an increase in the value of a currency relative to other currencies.…

Q: Although we stated that real assets constitute the true productive capacity of an economy, it is…

A: Question require an answer what happen In economy if there is no financial market. Let start…

Q: Researchers found that it is very difficult to forecast future exchange rates more accurately than…

A: The exchange market is a financial platform that facilitates the trading of currencies. This market…

Q: 3. Consider the monetary neutrality. Suppose that the central bank changed the money supply.…

A: Money Neutrality is an economic theory which states that the change in the supply of money or stock…

Q: safety net to safeguard the world financial system from the Asia-type o nternational Monetary Fund…

A: Introduction : In simple words, financial crisis refers to the situation in which the assets of any…

Q: stify a decision to avoid investing puntry's sovereign debt? Suitable checks and balances in p aking…

A: Country's sovereign debt is investment in securities issued by government of countries.

Q: The functions of the World Bank evolved in response to (Choose one answer) 1. the creation of the…

A: World Bank is a global organization that makes an attempt to fight economic conditions by providing…

Q: Which of the following best describes a key reason why the Euro currency has not fully lived up to…

A: The Euro, introduced in 1999 as the official currency of the Eurozone, was designed to enhance…

Q: Please step by step solutions and final answer is short answer mi

A: No, Belgium cannot directly influence the exchange rate between the Euro and the U.S. dollar through…

Q: Once capital markets are integrated, it is difficult for a country to maintain a fixed exchange…

A: Capital markets are places where money is exchanged between people who supply capital and those who…

Q: what are the advantages and drawbacks for digital Technology: How It Could Transform the…

A: Digital technology is referred as an usage of an advanced communication as well as information…

Q: Which of the following statement is incorrect? O Currency crisis is more likely happen under the…

A: Fixed exchange rate and free-floating exchange rate system are two ways in which a country can set…

Q: During crises like the COVID-19 crisis, major currencies such as U.S. Dollar and Euro should…

A: A currency is a method or a medium of exchange of goods and services in an economy that is used for…

Q: According to the flow of balance of payment (BOP) approach to exchange rate determination, there are…

A: 1.a. When a devoloping country runs persistent BOP deficits for a couple of years, then it may face…

Q: c) In what three ways do commercial banks make a profit from the monetary system?

A: Note: This post has three distinct questions. The first has been answered below.

Q: Consider that, until the Federal Reserve System was created, there was no one single US currency.…

A: The question is based on the concept of monetary policy and currency management.

Currency Market

The currency market, also known as the foreign exchange market, consists of currencies worldwide. This market determines the rate of all currencies based on the buying and selling of forex. It is an over-the-counter market. It is the largest and most liquid market based on trade volume.