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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

How can an unexpected fall in exchange rates injure the financial health of a nation’s banks?

To determine

Effect of Exchange rates on the banking system is to be determined.

Explanation

The most drastic impact of exchange rate fluctuations can happen via the banking system of an economy. Banks often borrow foreign currency from other countries and lend it in their domestic currency. When a bank borrows foreign currency then the bank converts these foreign currencies into domestic currency. The bank then lends it to the domestic firms, people, businessmen etc...

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