EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Question
Chapter 13, Problem 9RQ
To determine
To know: Effect on nominal exchange rate caused by expansionary
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Does an expectation of a stronger exchange rate in the future affect the exchange rate in the present? If so, how?
A country with fixed exchange rate can always raise its policy interest rate to curb down inflation.” – True or false? Explain.
How can a surge in exports and decrease in imports cause an increase in aggregate demand and what effects does it have on the exchange rate and interest rate?
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- Given that the country has a floating exchange rate regime, what are the consequences of a policy mix consisting of simultaneous expansionary fiscal policy and restrictive monetary policy?arrow_forwardWhat are two ways in which monetary policies and tight budgets allow a fixed exchange rate system to be successful?arrow_forwardUsing words and a graph, explain how the equilibrium in the foreign exchange market takes place. Make sure that, as part of your answer, you refer to the related equation.arrow_forward
- Please provide a short and concise answer to the following question: Why are exchange rates important in economy?arrow_forwardWhen is exchange-rate targeting likely to be a sensiblestrategy for industrialized countries? When is exchangerate targeting likely to be a sensible strategy for emerging market countries?arrow_forwardHow is it necessary for a nation with a fixed exchange rate and open financial markets to renounce its independence in terms of monetary policy?arrow_forward
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