! a) A fixed exchange rate is preferable to aflexible exchange rate becauseaggregate economic policies will be moreeffective.it is less costly to finance balance-of-payments disequilibria.periodic devaluations or revaluations will beunnecessary.None of these.

In the international market, flexible and foxed exchange rate system are used by the countries.

Answered: a) A fixed exchange rate is preferable…

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter22: International Finance

Section: Chapter Questions

Problem 10QP

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Similar questions

Controls on imports and/or foreign exchange dealing has been one of the arguments used in maintaining fixed exchange rate. What problems might arise if the government were toadopt this method of maintaining a fixed exchange rate?
This is not a writing assignment, this is a multiple-choice question Which of the below statements about international exchange rates and PPPs (Purchasing Power Parity) would you consider to be INCORRECT? Group of answer choices The PPP only focuses on internationally tradable items, while the exchange rate has a broader focus and includes both internationally tradable and items that are not internationally tradable. Exchange rates include only the values of internationally tradable items, while the PPP includes both internationally tradable items as well as those which are not internationally tradable items but are used by people in different countries. The rate at which one currency can be exchanged for another is the exchange rate. If $25 can purchase a bundle of goods in the U.S. and if a comparable bundle of goods will cost 750 rubles in Russia, then the PPP between the U.S. dollar and the Russian ruble would be $25=750 Russian rubles.
How do automatic adjustment mechanisms operate to correct a deficit inthe balance of payments under a fixed exchange rate system? Explain.
How and why will switching from a fixed to flexible exchange rate regime affect exports as a percentage of GDP/Exports-GDP-ratio Plz do fast.
using the Elasticities and absorption approach to the current account – how might changes to the exchange rate flow through to the domestic economy? What about Y-A = X-M?
When more than one government intervenes to move the value of an exchange rate, this is known as ________________intervention. Coactive Expansionary Coordinated International
A real exchange rate ...... could result from an ...... in ....... a) depreciation / increase / taxes b) appreciation / increase / taxes c) appreciation / increase / government spending d) depreciation / decrease / government spending e) appreciation / deccrease / the world interest rate
How does a fundamental increase to the net export in a small open economy potentiallyimpact the exchange rate and interest rate of that economy?
Suppose, in the New Keynesian open economy model, that there is a negative shock in future total factor productivitv and there are no capital controls. a) Under a flexible exchange rate, what are the equilibrium effects? b) Now suppose that there is a fixed exchange rate. Repeat part(a)
Refer to the previous exercise. Which type of foreign market intervention must the central bank ofColombia conduct to keep the exchange rate at alevel where the currency is not under- or overvaluedin terms of PPP?
Define overvalued exchange rates. Discuss four ways in which governments policymaker can respond to an overvaluation. What are the drawbacks of each approach?
Purchasing power parity suggests that exchange rates adjust to equalize the purchasing power of money across countries. Select one: True False

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a) A fixed exchange rate is preferable to a flexible exchange rate because aggregate economic policies will be more effective. it is less costly to finance balance-of- payments disequilibria. periodic devaluations or revaluations will be unnecessary. None of these.