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- A central bank can allow its currency to fall indefinitely, but it cannot allow its currency to rise indefinitely. Why not?where a country which currently uses a fixed exchange rate regime; If the central bank were to increase the money supply, what impacts would it have on the economy? Use a diagram to explain your answer.Barbados currently uses a fixed exchange rate regime. If the central back were to increase the money supply, what impacts would it have on the economy? Use a diagram to explain your answer.
- Barbados currently uses a fixed exchange rate regime. If the central bankwere to increase the money supply, what impacts would it have on theeconomy? Use a diagram to explain your answer.If the central bank were to increase the money supply in a fixed exchange rate regime, what impacts would it have on the economy? Use a diagram to explain your answer.Empirical studies find that exchange rates are much more variable then inflation differentials. How can you explain this empirical result? Thanks.
- Answer True, False or Uncertain. Brieáy explain your answer. Cooperative stabilization can help countries have a Öxed exchange rate regime and avoid high ináation(a) There are two countries in the world, Australia and Japan. Suppose that the central bank of Australia lowers the real interest rate, while the central bank of Japan raises the real interest rate. In this case, the nominal exchange rate (Yen/Dollar) increases. Answer true or false. Please briefly explain your answer. (b) Argentina is an open economy. Suppose that Argentina fixes the value of their currency to US dollars. If Argentina experiences hyperinflation, it can stabilize inflation by using its monetary policy freely. Answer true or false. Please briefly explain your answer.Explain why you agree or disagree with the following statements: A country’s currency will appreciate if its inflation rate is less than that of the rest of the world.
- What are the central bank's functions? How is the exchange rate of the country managed? Do you feel this choice of exchange rate management is beneficial to the country's GDP?Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world.a. Explain how this increase in interest rates will affect each of the following for the Country X.i. Investment ii. The international value of its currency iii. Exportson a flexible exchange system using central bank's resources, show the effects of an expansionary fiscal policy by a graph and explain it. (you can assume whatever you want on capital mobility) thanks!