Macroeconomics (7th Edition)
Macroeconomics (7th Edition)
7th Edition
ISBN: 9780134738314
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 19, Problem 19.1.1RQ
To determine

The exchange rate system and the difference between fixed exchange rate and managed float exchange rate.

Expert Solution & Answer
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Explanation of Solution

Exchange rate system:

An exchange rate system explains an agreement between countries on how to determine the exchange rate.

Difference between fixed exchange rate and managed floating exchange rate:

Under fixed exchange rate system, countries agree to keep the exchange rate fixed among their currencies for a long time. Under managed floating exchange rate, the demand and supply of currencies determine the equilibrium value of the currencies, with occasional government intervention.

Economics Concept Introduction

Concept introduction:

Exchange rate system: An exchange rate system explains an agreement between countries on how to determine the exchange rate.

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