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why might it be argued that recent changes in international prices of food and energy have...

why might it be argued that recent changes in international prices of food and energy have had a smaller impact on the U.S economy than would have been the case under the pre 1973 pegged rate systems?

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Answer #1

Before the 1973 US economy was following pegged rate system where dollar exchange was fixed and it was not allowed to move based on the indications of markets.

it would have been costly to import if value of dollar is fixed. it would have impacted the trade adversely or US could have paid more for import. But in free exchange system, When demand for oil and food rises in international market. Demand for dollar rises as well. Thus, dollar becomes dominant or appreciate. Thus, it becomes cheaper to import energy and food.

Thus, international prices of food and energy cause smaller impact on US economy.

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