If the Federal Reserve raises interest rates, what would happen to thepeso-dollar exchange rate in the absence of any change in Mexican interestrates?

Q: How does the government intervene in the fixed exchange rate to keep it stable? Explain your answer…

A: Fixed exchange rate A fixed exchange rate is a type of exchange rate system in which a monetary…

Q: what excactly is a fixed exchange rate and give an example of a country that has a fixed exchange…

A: "The rate at which one country's money is exchanged for another country's currency is known as the…

Q: describe some of the reasons for deviation in exchange power parit

A: Exchange power parity is a method through which changes in the currencies of different countries are…

Q: Would a domestic period of very high inflation make it easier or more difficult for a country to…

A: Answer to the question is as follows:

Q: How can exchange-rate targets lead to a speculativeattack on a currency?

A: The exchange rate targeting is the method by which a central bank intervenes in the market in order…

Q: If expected inflation drops in Europe, so that interestrates fall there, what will happen to the…

A: Exchange rate is the price of a currency of one country in terms of the currency of another country.…

Q: Contrast the effects of having a fixed versus a floating exchange rate for a country’s economy

A: Exchange rate are the currency values which are used by the countries for the purpose of imports…

Q: What does it mean by "exchange rate practices", when pertaining to excahnge rate systems and…

A: The measure that depicts the value of one currency being measured in terms of another currency to…

Q: Explain how changes in interest rates are likely to affect exchange rates. ​

A: The exchange rate reflects the price of one country's currency in terms of foreign country's…

Q: What determines the value of a currency in the flexible exchange rate system ?

A: The exchange rate is the value of one country’s currency to the value another country’s currency.

Q: According to the supply and demand model of exchange rate determination, debits in the US balance of…

A: In the international market, an exchange rate  is determined by demand and supply forces.

Q: Explain, with the aid of a graph, the effect on the rand/dollar exchange rate and the equilibrium…

A: The exchange rate communicates the bilateral price of the foreign currency in terms of the home…

Q: Discuss what the interest rate parity (IRP) tells us about forecasting future spot exchange rates.

A: Interest rate parity (IRP) refers to the theory according to which the interest rate differential…

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: 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: Suppose that the rate of returns on U.S dollar is 2% and the rate of return on Japanese yen (¥) is…

A: The interest parity condition states, εe=ε(1+ij1+iu) where ij and iu are rates of return on Yen and…

Q: What are the strong and weak points of the flexible exchange rate system? What are the strong and…

A: The flexible exchange rate the changes made in the exchange  rate according to buying and selling in…

Q: Show using the Mundell-Fleming model how an increase in tariffs would affect the nominal exchange…

A: Mundell-Fleming model is the extension  of IS-LM model in the run, that is explained as follows.

Q: Discuss the effect of capital account restrictions on attaining internal and external balance with…

A: Capital account restrictions results in a lower financial integration of that country with the…

Q: What are the main arguments presented against flexible exchange rates?

A: Answers to the question is as follows :

Q: Explain, with the aid of a graph, what will happen to the rand/dollar exchange rate and the…

A: The nations around the world tend to get involved in trade with each other, where the nations sale,…

Q: During the Great Financial crisis of 2008, the risk premium on the swiss franc diminished. What…

A: The 2008 financial crisis can be largely traced to the burst of the housing bubble. The banks have…

Q: What does it mean by "choosing an exchange rate system: constraints imposed by free capital flows",…

A: Exchange rate - The exchange tells us about the worth of the currency of one country in comparison…

Q: What is capital flight? When a country experiences capital flight, what is the effect on its…

A: Capital flight refers to the situation where assets or money rapidly flows out of the country…

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: What’s the required condition for a country’s  Current Account Balance to improve after the…

A: When there is a devaluation of the currency, then immediately the imports of the country becomes…

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: using the Elasticities and absorption approach to the current account – how might changes to the…

A: Elasticity approach:   The Elasticity approach is related to price effect of devaluation. This…

Q: Suppose the dollar/franc exchange rate equals $0.50 per franc. According to the Purchasing…

A:

Q: If a country consistently runs net export surpluses, then what will happen to its exchange rate?

A: A trade surplus occurs when the result of the above calculation is positive. A trade surplus…

Q: Suppose that soon after Denmark pegs to the euro, the Eurozone benefits from a favorable shift in…

A: It refers to the value of a country's currency in relation to another country's currency or an…

Q: Show graphically and explain how increasing import influence exchange rate

A: The equilibrium of trade influences cash trade rates through its effect on unfamiliar trade supply…

Q: Which is suitable exchange rate regime for desirable international business?

A: Exchange rate shows the value of one currency in terms of other currency. The two exchange rate…

Q: Is a country for which imports and exports comprise a large fraction of the GDP more likely to adopt…

A: The exchange rate refers to the price of one nation's currency in terms of another nation's…