Explain why with perfect capital mobility, monetary policy is completely ineffective when exchange rates are fixed. (Explain with graph)

Q: The demand increase for foreign currency is caused by:

A: The foreign currency refers to the currency of another country. The countries can exchange their…

Q: Consider an economy with zero capital mobility. Will exchange rate overshooting still occur? What…

A: In financial matters, overshooting, otherwise called the swapping scale overshooting speculation, is…

Q: advantages and disadvantages of currency boards and dollarization over a monetary policy that uses…

A: A currency board is a monetary authority which is required for maintainance of a fixed exchange rate…

Q: Empirical studies find that exchange rates are much more variable than inflation differentials. How…

A: The exchange rate refers to the relative value of a currency in terms of other foreign currencies.…

Q: Critically examine the FIVE types of foreign exchange market participants and identify their motives…

A: Foreign Exchange Market is a global digital network where foreign currencies are bought and sold by…

Q: What are the goals of monetary policy? What are the monetary policy targets? Which target is…

A: Hi. Since there are multiple questions we will answer the first three questions.

Q: What are the advantages and disadvantages of currencyboards and dollarization over a monetary policy…

A: A currency board has the advantage than the central bank because it prevents the manipulation in the…

Q: Using the Mundell-Fleming model, explain whether you think a country should pursue an expansionary…

A: The fixed exchange rate system is when the central bank interferes and buys or sells the foreign…

Q: Many developing countries, like Mexico, have moderate to high rates of inflation. At the same time,…

A: There is high inflation in many developed countries, such as México. As inflation is high currency…

Q: In the case of incomplete capital movements in the flexible exchange rate system, explain the…

A: In constricting or contractionary monetary policy, the decrease in money supply causes rise in the…

Q: Why did countries like the Philippines abandon the adjustable peg system and replaced it with the…

A: Introduction: Abandoned children are a concern in the Philippines. According to the United Nations…

Q: The Purchasing Power Parity Theory' came into prominence in 1916 through the writings of

A: To find : How did purchasing power parity thoery came in existence.

Q: explain Antidumping Duties and Managed Exchange Rates in detail

A: Antidumping Duties:- Antidumping duties can be defined as the protection tariffs that are imposed by…

Q: If the Fed raises the federal funds rate so that the exchange rate rises, then imports ________ and…

A: The value of a currency relative to the currency of associate other country or economic zone is…

Q: According to the Impossible Trinity, if a country decides to make its currency freely floating, what…

A: The Impossible trinity is an economic theory, which suggests that countries can choose from three…

Q: How can balance of payment surplus affect the exchange rate and cause cost-push inflation in the…

A: The balance of payment becomes surplus when the central bank sells the domestic currency and demands…

Q: If the Fed lowers the federal funds rate so that the exchange rate falls, then imports ________ and…

A: The fall in the exchange rate implies the fall in the value of currency or depreciation of currency…

Q: Suppose that a country with pegged exchange rate has reserves of $8 billion and is running a deficit…

A: Given Foreign exchange reserves = 8 Billion $ Current account deficit = 1 Billion per month…

Q: covered interest rate parity and uncovered interest rate parity are held or not held in short term…

A: What exactly is "covered interest rate parity" in terms of interest rates? The term "covered…

Q: There are three major types of exchange rate regimes: 1. Flexible rates; 2. Fixed-rate, unified…

A:

Q: Are international reserve needs different for different exchange rate regimes? Explain.

A: Exchange rate regime Exchange rate regime can be defined as a way through which a country manages…

Q: When a country operates with a currency board, the central bank's sole objective is to maintain the…

A: When a country operates with a currency board, the central bank's sole objective is to maintain the…

Q: Consider the case of a fixed exchange rate system as held in Europe before the Euro. All countries…

A: When the country fixes its exchange rate with foreign economy like Germany, then the domestic…

Q: What is the difference between a sterilized and non-sterilized central bank intervention in the…

A: Sterilization intervention does not influence on the monetary base, interest rate and the demand and…

Q: About Capital mobility assuming κ>h on flexible Exchange rates, Show the effects of contractionary…

A: Flexible exchange rate system: The exchange rate under this is determined by the market forces of…

Q: In the Mundell–Fleming model with floating exchange rates, explain what happens to aggregate income,…

A: Answer -  Mundell- Fleming model - This is the extension of IS-LM model . Under this model BOP…

Q: Describe the economic logic behind the theory of interest rate parity.

A: Interest rate parity is defined as the difference between the interest rates on similar type of…

Q: What, then, determines exchange rates in the short run?

A: The exchange rate is determined by the market forces of demand and supply. After a certain stage,…

Q: Use the Mundell-Fleming model to explain the effect of restrictive monetary policy with floating…

A: Mundell-Fleming model explains the effect of policies that can be both fiscal and monetary in nature…

Q: Derive and explain the monetary approach to exchange rate determination

A: Exchange rate system in a country could be fixed, floating and managed floating.  The fixed system…

Q: What techniques can a central bank use to stabilize the exchange value of its currency?

A: Monetary policy refers to actions pursued by the central bank of an economy to maximize the…

Q: on a fixed exchange rate explain the effects of contractionary monetary policy by graph

A: Under perfect mobility, the BP curve is a horizontal line and the domestic interest rate equals the…

Q: How does a country’s decision to fix its exchange rate to that of another nationshape the conduct of…

A: The fixed exchange rate/pegged exchange rate is the regime in which the worth of the exchange rate…

Q: Compare and discuss the effectiveness of monetary policy BOTH under Floating Exchange Rate System…

A: Monetary policy under floating exchange rate: Expansion of monetary policy is quite effective. When…

Q: How is the value of a flexible exchange rate determined? Question 10 options:…

A: Flexible exchange rates are those that have been based on the worldwide supply and demand of a given…

Q: Consider a country that fixes the value of its currency to gold. This country can freely conduct…

A: Answer -

Q: Explain currency Exchange Rate with three different  examples.

A: Balance of payments records the international transactions that take between one nation and other…

Q: As it relates to the European Union, what is the ECB? The European Central Bank, responsible for…

A: The European Central Bank (ECB) is the central bank which handles the monetary policies of the…