Answered: Please list and explain in your own…

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.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter34: International Finance

Section: Chapter Questions

Problem 6QP

See similar textbooks

Related questions

Q: Explain why a decline in a country's exchange rate will generally increase the demand for its goods…

A: Demand for goods and services by the countries results in trading. Export and imports and the main…

Q: Explain the biggest advantage and the biggest disadvantage of fixed exchange rates compared to…

A: The economies around the world are involved in various transactions with each other. The…

Q: What are the benefits of having a fixed exchange rate?

A: Fixed exchange rate system refers to the one in which the value of a currency is pegged with another…

Q: What is meant by the term exchange rate .

A: The rate at which one currenccy of a nation is exchanged to another is commonly known as an exchange…

Q: describe some of the reasons for deviation in exchange power parit

A: Exchange power parity is a method through which changes in the currencies of different countries are…

Q: Would a domestic period of very high inflation make it easier or more difficult for a country to…

A: Answer to the question is as follows:

Q: Please explain flexible and fixed exchange rates. Show ways to maintain a strong or a weak currency

A: Flexible exchange rate A flexible exchange rate, also known as a floating exchange rate, fluctuates…

Q: Contrast the effects of having a fixed versus a floating exchange rate for a country’s economy

A: Exchange rate are the currency values which are used by the countries for the purpose of imports…

Q: Who would demand U.S. dollars in the foreign exchange market? U.S. firms and households wishing to…

A: Foreign Exchange Market: The foreign exchange market can be defined as an institution which…

Q: Describe the foreign exchange market and its components.

A: Foreign exchange market- it is a market, which is also known as forex and currency market. It is a…

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…

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

A: Central banks no longer need to retain international reserves because of flexible exchange rates.…

Q: How does a fall in the exchange rate cause an increase in the cost of raw imported materials?

A: The import and export of a country are affected by the exchange rates.

Q: Discuss three factors that would impact the values of the major currencies in foreign exchange

A: Foreign exchange is also called forex or FX, which refers to the exchange of one currency to another…

Q: How do international investment activities affect exchange rates?

A: Exchange rate refers to the amount of domestic currency that requires to buy one unit fo foreign…

Q: Effect of fiscal and monetary policy on exchange rate in Zimbabwe

A: The value of one currency stated in terms of another currency is referred to as the exchange rate.…

Q: Discuss the view that an exchange rate appreciation is always beneficial for an economy.

A: Exchange rate can be defined as the value of currency of a country in terms of the currency of…

Q: If a country has a floating exchange rate will a rise in exchange rate be bad or good for exporters?

A: Exchange rate refers to the rate at which the currency of a country is exchanged for the currency of…

Q: Explain supply and demand for exchange rates

A: The demand–supply framework enables you to predict the following period’s rate. once you understand…

Q: Explain how exchange rates may impact the performance of international equity investment.

A: Changes in exchange rates may not seem to affect most people in their everyday lives, but indirect…

Q: For small, open economies that export and import a large volume of goods and services, a fixed…

A: In the international market, exchange rate are determine under fixed or flexible exchange rate…

Q: If a country has a floating exchange rate, then will a rise in the exchange rate be bad or good for…

A: The rate at which one country's money is exchanged for another country's currency is referred to as…

Q: Is a country for which imports and exports comprise a large fraction of the GDP more likely to adopt…

A: The exchange rate refers to the price of one nation's currency in terms of another nation's…

Question

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.

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

VIEW

Step 2

VIEW

Step by step

Solved in 2 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

List some advantages and disadvantages of the different exchange rate policies.
For small, open economies that export and import a large volume of goods and services, a fixed exchange rate often make sense. Why does it make sense? And at what cost to the country?
Explain supply and demand for exchange rates
What are the benefits of having a fixed exchange rate?
If a country has a floating exchange rate will a rise in exchange rate be bad or good for exporters?
Explain how exchange rates are determined in international business
Why floating exchange rate is more competitive than hard peg exchange rate?
Debate the relative merits of fixed and floating exchange rate regimes. From the perspective of an international business, which system is the more desirable for an international business? please help with this discussion
Provide and explain the equilibrium equation of the Foreign Exchange Market? Referring to the relationship between exchange rates and interest rates, explain what interest rate parity means internationally
What is the foreign exchange market? Give examples of those who would be demanders or suppliers of the US dollars in the foreign exchange market. Discuss what is meant when a currency appreciates (strengthens) or depreciates (weakens), and examples of who would benefit from each situation.
What is meant by the term exchange rate .
It is often believed that the value of the currency of some countries are too low, which gives the firms in those countries an unfair competitive advantage. Econometric evidence indicates that relative PPP does not hold in the short-run, while it does hold in the long-run. a. What does this imply for countries with a fixed exchange rate that is 'unfairly low'? b. Can a country maintain an 'unfair' competitive advantage in the long-run by somehow manipulating its exchange rate? Explain. c. Assume the UK and the US are the only countries in the world. Explain what will happen in the long run to the pound and the nominal interest rate in the UK as a result of a decrease in the expected inflation rate in the UK..