Principles Of Economics V8.0
18th Edition
ISBN: 9781453384503
Author: Taylor, John B.; Weerapana, Akila
Publisher: BOSTON ACADEMIC (DBA FLAT WORLD)
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 29, Problem 5SCQ
This chapter has explained that “one of the most economically destructive effects of exchange rate fluctuations can happen through the banking system, if banks borrow from abroad to lend domestically. Why is this less likely to be a problem for the U.S. banking system?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
How can an unexpected fall in exchange rates injure the financial health of a nation’s banks?
Although it is a member of the European Community, Denmark is not part of the
eurozone; it has its own currency, the krone. Because the krone is pegged to the
euro, Denmark's central bank is obliged to maintain the value of the krone within
2.25 percent either above or below the value of the euro. According to an article
in the Wall Street Journal,
in 2017, the Danish central bank was forced to intervene in foreign currency
markets "to keep the krone from strengthening too much."
If the krone was strengthening, did it take more kroner to exchange for a euro or
fewer kroner? Briefly explain.
More kroner, because the krone has more value.
Fewer kroner, because the krone has less value.
Fewer kroner, because the krone has more value.
More kroner, because the krone has less value.
In 2020, the Central Bank of Faunaland increased the money supply growth by 8%, whereas the Central Bank of Gregoria allowed a relatively low money growth of 2%. Faunaland also experienced a relatively high output growth of 4%, whereas Gregoria had relatively robust output growth of 6%. Suppose the Central Bank of Gregoria wants to maintain an exchange rate peg with the currency of Faunaland. What money growth rate would the Central Bank of Gregoria have to choose to keep the value of the currency of Gregoria fixed relative to the currency of Faunaland? For this question, use the simple monetary model, where L is constant.
a. 4%
b. 6%
c. 8%
d. 10%
Chapter 29 Solutions
Principles Of Economics V8.0
Ch. 29 - How will a stronger euro affect the following...Ch. 29 - Suppose that political unrest in Egypt leads...Ch. 29 - Suppose U.S. interest rates decline compared to...Ch. 29 - Suppose Argentina gets inflation under control and...Ch. 29 - This chapter has explained that one of the most...Ch. 29 - A booming economy can attract financial capital...Ch. 29 - How would a contractionary monetary policy affect...Ch. 29 - A central bank can allow its currency to fall...Ch. 29 - Is a country for which imports and exports...Ch. 29 - What is the foreign exchange market?
Ch. 29 - Describe some buyers and some sellers in the...Ch. 29 - What is the difference between foreign direct...Ch. 29 - What does it mean to hedge a financial...Ch. 29 - What does it mean to say that a currency...Ch. 29 - Does an expectation of a stronger exchange rate in...Ch. 29 - Does a higher rate of return in a nations economy,...Ch. 29 - Does a higher inflation rate in an economy, other...Ch. 29 - What is the purchasing power parity exchange rate?Ch. 29 - What are some of the reasons a central bank is...Ch. 29 - How can an unexpected fall in exchange rates...Ch. 29 - What is the difference between a floating exchange...Ch. 29 - List some advantages and disadvantages of the...Ch. 29 - Why would a nation dollarize—that is, adopt...Ch. 29 - Can you think of any major disadvantages to...Ch. 29 - If a countrys currency is expected to appreciate...Ch. 29 - Do you think that a country experiencing...Ch. 29 - Suppose a country has an overall balance of trade...Ch. 29 - We learned that changes in exchange rates and the...Ch. 29 - If a developing country needs foreign capital...Ch. 29 - Many developing countries, like Mexico, have...Ch. 29 - What would make a country decide to change from a...Ch. 29 - A British pound cost 2.00 in U.S. dollars in 2008,...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Define committed costs and provide two examples of committed costs?
Construction Accounting And Financial Management (4th Edition)
What is the relationship between management by exception and variance analysis?
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Discussion Questions 1. What characteristics of the product or manufacturing process would lead a company to us...
Managerial Accounting (4th Edition)
Relevant data from the Poster Companys operating budgets are: Additional data: Capital assets were sold in Janu...
Principles of Accounting Volume 2
E2-13 Identifying increases and decreases in accounts and normal balances
Learning Objective 2
Insert the mis...
Horngren's Accounting (12th Edition)
E6-14 Using accounting vocabulary
Learning Objective 1, 2
Match the accounting terms with the corresponding d...
Horngren's Accounting (11th Edition)
Knowledge Booster
Similar questions
- In the paper by Degrauwe, The Governance of a Fragile Eurozone by Paul De Grauwe, he argues that the fundamental problem in the Euro-zone today is that countries cannot borrow in their own currencies. Explain what he means by this and what the consequences of this are for Euro-zone countries currently in crisis. DeGrauwe argues that countries in the Eurozone monetary union can face both liquidity and solvency crises – problems that could not occur in a country that issues its own currency, like the UK. Explain. Refer to his comparison of Spain to the UK.arrow_forwardWhat is the foreign exchange intervention and how its affects the money supply (Give an example with the graph)arrow_forwardCan you think of a way that Chinese monetary policy might impact some other part of the world economy?arrow_forward
- How does Balance of International Payment affect the financial systemsarrow_forwardBriefly describe how liquidity black holes can occur. How can regulation lead to liquidity black holes?arrow_forwardExplain to the citizens of your country the situations that surround the balance of payment in an economy.arrow_forward
- In some economies, a significant portion of the internal debts, that is, debts of one domestic resident to another are in foreign currency terms. This phenomenon is called “liability dollarization”. How might liability dollarization worsen the financial market disruption caused by a balance of payments crisis and create the conditions for a banking crisis?arrow_forwardBetween 1879 and 1914, the world's major nations adhered to the gold standard. Under the gold standard, a country maintained a fixed relationship between its stock of gold and its money supply. Suppose that Germany defined a German mark as 30 grains of gold, and the United States defined $1 as 60 grains of gold. Under the gold standard, a German mark would have been worth U.S. dollars.arrow_forwardQ3-13 If a country adopts a currency board arrangement, a result is that the country's money supply _______ be increased by the purchase of domestic assets from the country's citizens by the country's central bank.In this arrangement, the country's money supply _______ be increased by the purchase of foreign assets from the country's citizens by the country's central bank. Select one: a. can / can also b. can / cannot c. cannot / can d. cannot / cannotarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning