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?
Homework Answers
The currency of the nation facing higher inflation will depreciate. This happens because inflation lowers the purchasing power of a currency. So, when an economy faces a higher inflation, its exchange value also falls i.e. the currency depreciates.
Add Answer to:
27 If two currencies are traded in a flexible exchange
rate system and one nation experiences...
How do supply and demand determine the dollar exchange rate? The supply for dollars by importers...
How do supply and demand determine the dollar exchange rate? The supply for dollars by importers who sell dollars for the foreign currency interacts with the demand curve for dollars from buyers of exports from the US. The supply for dollars by those who are wanting to sell a foreign currency interacts with the demand curve for dollars from buyers who are buying foreign currency. The two governments get together and come to a conclusion regarding what rate they will...
QUESTION 2. In the late 1960s advocates of a floating exchange rate system argued that one...
QUESTION 2. In the late 1960s advocates of a floating exchange rate system argued that one advantage of a world monetary system with market determined exchange rates is that it would impose symmetry on the system. A. Discuss in what ways a system of fixed exchange rates, such as Bretton Woods, is asymmetric. What does asymmetric mean in this context? Why might it be advantageous for the world community to impose symmetry on the system? B. Do floating exchange rates...
Briefly describe the current International Monetary System. How does the Current systems differ from the system...
Briefly describe the current International Monetary System. How does the Current systems differ from the system that was in place prior to August 1971? Prior to 1971, the world operated on a fixed exchange rate system. The value of the U. S. Dollar link to gold at the fixed price of $35 per ounce and the values of other currencies then tied to the dollar. For example, in 1964, the British pound was fixed at $2.80 for 1 pound, with...
Several factors affect the exchange rate of a currency with another currency. Which of the following...
Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply. When a government limits imports and restricts foreign exchange transactions, its currency's value tends to increase relative to other currencies. An increase in inflation tends to increase the currency's value with respect to other currencies with lower inflation. If a government intends to prevent its currency's value...
4. Assume that Canada is a small open economy which uses a system of flexible exchange...
4. Assume that Canada is a small open economy which uses a system of flexible exchange rates. The economy is in equilibrium when there is a sudden decrease in real money demand. Explain what will happen to the exchange rate, output, and the real interest rate in the short-run and in the long-run
Identify two world currencies. To demonstrate variances in exchange rates, show the comparative v...
Identify two world currencies. To demonstrate variances in exchange rates, show the comparative value of the two currencies in 2000, 2010 and March 1, 2019 (value of one currency relative to the other). How have they changed over time? What are some reasons why? *Please answer in DETAIL*
5. Interest rate parity Aa Aa E The rise of globalization is due to the many...
5. Interest rate parity Aa Aa E The rise of globalization is due to the many companies that have become multinational corporations for various reasons-for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well-for example, political risk and exchange rate risk. Several factors affect the exchange rate of a currency...
If a nation faces high (above one in absolute value) price elasticities of demand for exports...
If a nation faces high (above one in absolute value) price elasticities of demand for exports and imports what should it do to the exchange rate? If , on the other hand, the nation faces low elasticities of exports and imports (their sum being less than the absolute value of one) how should it influence its exchange rate
Question 4 (10 Marks): Assume that Canada is a small open economy which uses a system of flexible exchange rates. Th...
Question 4 (10 Marks): Assume that Canada is a small open economy which uses a system of flexible exchange rates. The economy is in equilibrium when there is a sudden decrease in real money demand. Explain what will happen to the exchange rate, output, and the real interest rate in the short-run and in the long-run.
1. If the exchange rate of the dollar relative to other currencies is determined by market...
1. If the exchange rate of the dollar relative to other currencies is determined by market forces, a. the purchases of Americans from foreigners will be equal to the sales of Americans to foreigners. b. Americans will gain from the international trade only if foreigners lose an equal amount. c. the gains of Americans from international trade will be just equal to the gains of foreigners from the trade. d. imports from foreigners will create jobs in other countries but...
Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply. When a government limits imports and restricts foreign exchange transactions, its currency's value tends to increase relative to other currencies. An increase in inflation tends to increase the currency's value with respect to other currencies with lower inflation. If a government intends to prevent its currency's value...
5. Interest rate parity Aa Aa E The rise of globalization is due to the many companies that have become multinational corporations for various reasons-for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well-for example, political risk and exchange rate risk. Several factors affect the exchange rate of a currency...
Question 4 (10 Marks): Assume that Canada is a small open economy which uses a system of flexible exchange rates. The economy is in equilibrium when there is a sudden decrease in real money demand. Explain what will happen to the exchange rate, output, and the real interest rate in the short-run and in the long-run.
Most questions answered within 3 hours.
-
Fiscal policy is the deliberate manipulation of taxes and
government spending to alter GDP, employment, inflation...
asked 35 minutes ago -
evaluating an expression using only one digit and + and - as
operators ....3+5-1+7-5+8
-----------------------
stack...
asked 36 minutes ago -
Two concentric current loops lie in the same plane. The smaller
loop has a radius of...
asked 1 hour ago -
1)Which of the following is an
important difference between qualified and nonqualified retirement
plans?
a. Qualified...
asked 1 hour ago -
What's the streaming business's problem on the
horizon?
asked 2 hours ago -
I need help with writing the conclusion for this online lab
report
Abstract
By testing the...
asked 2 hours ago -
For the reaction 1N2+3H2-----> 2NH3, would the reaction rate
trend be: delta[NH3]/ delta t = -2...
asked 2 hours ago -
Within your current/past organization, identify a problem/issue
and format a design to address same. You may...
asked 2 hours ago -
A sock stuck to the side of a clothes-dryer barrel has a
centripetal acceleration of 24...
asked 3 hours ago -
A perfect gas undergoes an isentropic process such that its
volume doubles. If the ratio of...
asked 4 hours ago -
list the elements in groups 3A to 6A in the same order as in the
periodic...
asked 4 hours ago -
Estimating effect size. Peng and Chen (2014)
evaluated effect size estimates for various tests. In their...
asked 4 hours ago