Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with the U.S. dollar, which was linked to gold. The gold standardized system was called the Bretton Woods Fixed Exchang Rate System. This system collapsed in 1971, and since then, the dollar has not been linked to gold. Based on your understanding of the international monetary system, complete the following statements: • A exchange rate is the quoted price for a unit of foreign currency to be delivered within a very short period of time. • The government sets a exchange rate that is allowed to fluctuate only slightly (if at all) around the pa value.
Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with the U.S. dollar, which was linked to gold. The gold standardized system was called the Bretton Woods Fixed Exchang Rate System. This system collapsed in 1971, and since then, the dollar has not been linked to gold. Based on your understanding of the international monetary system, complete the following statements: • A exchange rate is the quoted price for a unit of foreign currency to be delivered within a very short period of time. • The government sets a exchange rate that is allowed to fluctuate only slightly (if at all) around the pa value.
Chapter4: Exchange Rate Determination
Section: Chapter Questions
Problem 25QA
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Transcribed Image Text:Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with
the U.S. dollar, which was linked to gold. The gold standardized system was called the Bretton Woods Fixed Exchange
Rate System. This system collapsed in 1971, and since then, the dollar has not been linked to gold.
Based on your understanding of the international monetary system, complete the following statements:
A
exchange rate is the quoted price for a unit of foreign currency to be delivered within a very short
period of time.
The government sets a
exchange rate that is allowed to fluctuate only slightly (if at all) around the pa
value.
• When American customers import less from Europe than they export to Europe, the euro
relative
to the dollar.
• The
of a currency refers to a decrease or increase, respectively, in the foreign
exchange value of a floating currency.
● Under a
floating regime, the government plays a significant role in managing the exchange rate by
manipulating the currency's supply and demand.
Currencies under such a regime are
currencies.
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