How does the flexible exchange rate contributes to reach target inflation rate?
How does the flexible exchange rate contributes to reach target inflation rate?
Homework Answers
Answer
One of the main monetary policy objectives of Central Bank (due to Flexible Exchange Rate) is Price stability. Maintaining low and stable inflation around 2 per cent provides a credible nominal anchor.
Changes in the prices of imported goods and services due to changes in the exchange rate has a direct effect on the consumer price index. For example, an appreciation of the exchange rate usually reduces the price of imported consumer goods and durables, raw materials and capital goods. This causes a reduction in the inflation rate. Hence, flexible exchange rate contributes to reach target inflation rate.
Add Answer to:
How does the flexible exchange rate contributes to reach
target inflation rate?
Q. What is a flexible exchange rate and how does it work? What is a crawling peg and how does it work?
Q. What is a flexible exchange rate and how does it work? What is a crawling peg and how does it work?
III. Monetary policy under flexible exchange rates a. How does a monetary expansion in an economy...
III. Monetary policy under flexible exchange rates a. How does a monetary expansion in an economy with flexible exchange rates affect consumption and investment? b. How does a monetary expansion in an economy with flexible exchange rates affect net exports?
In a small open economy with flexible exchange rates and perfectly flexible prices, how does an...
In a small open economy with flexible exchange rates and perfectly flexible prices, how does an increase in import tariffs affect net exports and the volume of trade? (Hint: Volume of trade is the sum of exports plus imports)
Use the concept of the real exchange rate to explain why high rates of inflation in...
Use the concept of the real exchange rate to explain why high rates of inflation in a country are seen as a problem. Is this problem worse under a fixed or flexible exchange rate regime?
If a central bank implements an exchange rate targeting policy successfully, the country's inflation rate is...
If a central bank implements an exchange rate targeting policy successfully, the country's inflation rate is most likely to be: A) greater than that of the target currency. B) the same as that of the target currency. C) less than that of the target currency.
27 If two currencies are traded in a flexible exchange rate system and one nation experiences...
27 If two currencies are traded in a flexible exchange rate system and one nation experiences higher inflation than another, what should happen to the exchange rate? What is the economic logic behind this answer?
How would rapid inflation in Canada affect U.S. tourism travel to Canada? Does it make any...
How would rapid inflation in Canada affect U.S. tourism travel to Canada? Does it make any difference whether the exchange rate between Canadian and U.S. dollars is fixed or flexible? Please make answer able to copy Thank you.
discussion how inflation or exchange rate movements affect the accounting industry.
discussion how inflation or exchange rate movements affect the accounting industry.
If inflation is too high, the RBA will __________ (increase / decrease) its cash rate target....
If inflation is too high, the RBA will __________ (increase / decrease) its cash rate target. If the actual cash rate remains below the target, the RBA can intervene via open market _____________ (purchases / sales] of bonds. The yield curve is likely to shift __________ (up / down), especially at its ___________ (short / long) end. The impact on the long end of the yield curve can be strengthened by convincing market participants that the new cash rate target...
(i) Explain the difference between the nominal and real interest rate. (ii) How does the Reserve...
(i) Explain the difference between the nominal and real interest rate. (ii) How does the Reserve Bank of Australia control the interest rate? (iii) You hear a news report that output growth and inflation are lower than expected. How do you expect that report to affect market interest rates? Explain why. (iv) The Reserve Bank faces a large recessionary gap. How would you expect it to respond? Explain step by step how its policy change is likely to affect the...
III. Monetary policy under flexible exchange rates a. How does a monetary expansion in an economy with flexible exchange rates affect consumption and investment? b. How does a monetary expansion in an economy with flexible exchange rates affect net exports?
If a central bank implements an exchange rate targeting policy successfully, the country's inflation rate is most likely to be: A) greater than that of the target currency. B) the same as that of the target currency. C) less than that of the target currency.
Most questions answered within 3 hours.
-
exercise on VSEPR and molecular structrue.
octahedral
SeCl62-
TeCl62-
ClF62-
distorted
SeF62–
IF6–
asked 35 minutes ago -
A regression equation that describes the relationship between
the amount of the bill ($) at a...
asked 6 minutes ago -
284 mL of a 0.52 M potassium hydroxide solution is added to 467
mL of a...
asked 34 minutes ago -
Little’s Law: Val d’Costa is a world famous ski village in the
French Alps. Because of...
asked 1 hour ago -
Find the absolute error D for the calculation if A + B/C=D A=
9.4 +/- 0.4...
asked 1 hour ago -
New Air Heating and Cooling, manufactures furnaces and central
air units. The company pride itself on...
asked 1 hour ago -
A coach uses a new technique to train gymnasts. Seven
gymnasts were randomly selected and their...
asked 3 hours ago -
While rotating the tires on your car you notice a rock [mass =
0.1 Kg] stuck...
asked 5 hours ago -
Using MARS simulator, write MIPS programs according to
the following scenarios: Receive a positive integer number...
asked 7 hours ago -
An object in front of a concave mirror has a real image that is
11.5 cm...
asked 7 hours ago -
Consider the reaction, C3 H8 + O2 --> CO2 + H2O. How many
moles of O2...
asked 9 hours ago -
You and your opponent both roll a fair die. If you both roll the
same number,...
asked 9 hours ago