How can a nation in a flexible exchange rate regime correct the problems of inflation, recession and deficit? Discuss briefly

Q: A lesson of the "impossible trinity" is that, if a country wants to have both exchange rate…

A: "Exchange rate refers to the value of one currency in terms of another." In other words, the…

Q: Examine how surpluses and deficits in the balance of payments (BOP) affect exchange rates.

A: Introduction - All central bank transactions are recorded in the account on the balance of payments…

Q: Explain why in case of a fixed exchange rate regime temporary and permanent fiscal policy changes do…

A: A fixed exchange refers to when the value of a country's currency is fixed against foreign…

Q: East Asian economies had opened their borders to Foreign Direct Investment and their productivity…

A: The exchange rate refers to the rate at which one currency can be exchanged for other currency. It…

Q: Is monetary approach an automatic adjustment mechanism to correct a deficit in the balance of…

A: The exchange rate is the rate at which the currencies of two countries can be traded for each other.…

Q: n the flexible exchange rate regime, the equilibrium exchange rates are determined by demand and…

A: The exchange rate is the rate at which the currency of one country can be exchanged for another…

Q: What is the relation between exchange rate and balance of payments .         -Appreciated currency…

A: BOP is a statement comprising of all the transactions between individuals of a country with the…

Q: If a government of a country with a zero trade balance increases its budget deficit, then what will…

A: Import/export imbalances can be a decent or a terrible sign for an economy, and exchange excesses…

Q: Compare the effects of monetary and fiscal policies (i.e. strengthened or weakened) to maintain…

A: Before answering the above question, let us first understand some key concepts:  Monetary policy…

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

A: Mudell - Fleming model - This model is extension of IS-LM model . This model evaluate IS-LM model in…

Q: Discuss how the value of a currency under flexible exchange rates is determined?

A: Answer: Introduction: The exchange rate refers to the price of one currency in terms of another…

Q: Consider a small open economy described by the following equations: Y = C + I + G + NX, Y = 5,000, G…

A: Equilibrium in economics is a state of stability and balance. Any deviation from this level will…

Q: The theory of purchasing power parity says:   a. The real exchange rate is always greater than one…

A: The purchasing power parity indicates the comparison of different foreign currencies in terms of…

Q: Other fundamental things equal, an increase in the exchange rate value of the domestic currency will…

A: The current account is the balance of trade reflecting all the payments made for goods, services,…

Q: If a £ is cheaper in terms of a foreign currency than the equilibrium exchange rate, a exists at the…

A: If a £ is cheaper in terms of a foreign currency than the equilibrium exchange rate, a…

Q: Suppose purchasing power parity is true. What happens to the nominal exchange rate if the price of…

A: The exchange rate is the rate at which the currencies are exchanged for one another. The exchange…

Q: How does a fall in the exchange rate cause an increase in the cost of raw imported materials?

A: The import and export of a country are affected by the exchange rates.

Q: Which of the following Exchange Rate Regime allows for government intervention in the market for…

A: In flexible exchange rate, the price of the currency is determined by the forces of demand and…

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: How does a trade deficit affect floating exchange rates?

A: Trade deficit is a situation where the imports of a country exceeds the exports which states that…

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

A: Mundell Fleming model shows the short run relationship between a country’s interest rate, nominal…

Q: Discuss the view that an exchange rate appreciation is always beneficial for an economy.

A: Exchange rate can be defined as the value of currency of a country in terms of the currency of…

Q: What are two ways in which monetary policies and tight budgets allow a fixed exchange rate system to…

A: the AA-DD model to portray the impacts of financial, monetary, and exchange rate policy under an…

Q: Give reasons, supported with clear explanations, why countries opt for a floating exchange rate?

A: The exchange rate is the rate at which domestic currency is exchanged with foreign currency in the…

Q: For a small open economy with a fixed exchange rate: а. monetary policy is effective and fiscal…

A: In the international market, there are two types of exchange rate system that are fixed exchange…

Q: otherwise downvote switches from a flexible exchange rate regime to a fixed exchange rate regime,…

A: The monetary policy is not an effective when a country follow the fixed exchange rate system.  The…

Q: chasing power parity may not fully explain exchange rate

A: Option (c). When a fresh student starts looking for job, he enter labor force and is unemployed.…