Question

When the nation lets the exchange market take care of the exchange rate by letting the...

When the nation lets the exchange market take care of the exchange rate by letting the value of its currency drop until exchange market equilibrium is restored, it is said to adopt.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

When the nation lets the exchange market take care of the exchange rate by letting the value of its currency drop until exchange market equilibrium is restored, it is said to adopt Floating exchange rate. ( also known as flexible exchange rate system ) . In this central bank allow exchange rate to be freely determined by foreign exchange market .

when the value of currency drop's in comparison to foreign currency, it is said to be depreciated in comparison to foreign currency. When a currency depreciate it becomes less expensive in terms of foreign currecy and it can increase a country’s export activity as its products and services become cheaper to buy.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
When the exchange rate falls for Dollars, in the foreign exchange market the    A) quantity...
When the exchange rate falls for Dollars, in the foreign exchange market the    A) quantity demanded of the dollar increases.     B) demand for the $ currency increases. C) quantity demanded of the $ decreases.            D) demand for the $ decreases
Consider a small, open economy with perfect capital mobility and a fixed exchange rate regime, whose...
Consider a small, open economy with perfect capital mobility and a fixed exchange rate regime, whose domestic interest rate is currently the same as the foreign interest rate. Suppose that it adopted the USD as its official currency. a. Draw the IS-LM diagram for this nation at its general equilibrium point E1, with equilibrium income level Y1 and domestic interest rate r1, what happened if central bank of this country expanded its money supply, please show the changes in the...
1. Suppose that the United States fixes the dollar-pound exchange rate. In the process of maintaining...
1. Suppose that the United States fixes the dollar-pound exchange rate. In the process of maintaining the fixed exchange rate, the U.S. central bank regularly finds itself in a position of having to increase its reserves of pounds. Based on this, we could conclude that the fixed dollar-pound exchange rate consistently exceeds the equilibrium exchange rate that would be produced by a private foreign exchange market. the U.S. central bank is regularly having to reduce the domestic money supply. the...
QUESTION 6 Suppose a country wants a fixed exchange rate for its currency above the market...
QUESTION 6 Suppose a country wants a fixed exchange rate for its currency above the market exchange rate. It will, a. run a narrow balance of payments surplus b. use up some of its foreign currency reserves to do so c. both A and B d. neither A nor B QUESTION 7 Suppose a country maintains a fixed exchange rate for its currency below the market exchange rate. It will, a. run a narrow balance of payments surplus b. build...
True or false and explain please. 1.Like gold standard, the currency board (foreign exchange rate policy)...
True or false and explain please. 1.Like gold standard, the currency board (foreign exchange rate policy) is doomed to fail. 2.For euro to become a world currency, it is necessary that the eurozone countries run long-term trade deficits. 3.For a country with deficit in current account, devaluation of domestic currency will help reduce the deficit immediately. 4.In a nation which pegs its currency to the U.S. dollar at fixed exchange rates, it is very likely that the central bank must...
1. When market participant appreciate a currency what happens to its value? a. it appreciates b....
1. When market participant appreciate a currency what happens to its value? a. it appreciates b. it depreciates c. it goes up d. it goes down in value 2. When a country adopts another country's currency as their own, this is called. a. pegged exchange rate b. dollarization c. flexible exchange rate d. original sin
true or false: ) 1. Like gold standard, the currency board (foreign exchange rate policy) is...
true or false: ) 1. Like gold standard, the currency board (foreign exchange rate policy) is doomed to fail. (2) You are to buy ¥200m with Australian dollars through a forward contract maturing in 6 months. The forward price is F6(¥/A$)=100. If the spot rate at the maturity is S6(¥/A$)=80. You have a loss in the forward trading. (3) For euro to become a world currency, it is necessary that the eurozone countries run long-term trade deficits. (4) For a...
Consider an open economy operating under fixed exchange rate. using equilibrium condition for the good market,...
Consider an open economy operating under fixed exchange rate. using equilibrium condition for the good market, illustrate in a diagram the short-run effect of an increase in the foreign interest rate on domestic output. Assume that UIP holds and that market participants believe that the exchange rate will stay fixed at its current value in the future. explain why?
Q1: A nation suffering from high unemployment would welcome: Select ALL that apply (I picked a)...
Q1: A nation suffering from high unemployment would welcome: Select ALL that apply (I picked a) and b) and got partial point a)A wave of foreign investment b)currency depreciation c)effects of less expensive exports d)currency appreciation Q2: A country is said to have an absolute advantage in the production of a good when: a)its opportunity cost of producing the good is lower than another country. b)it can produce the good using fewer resources than another country. c)it specializes in the...
Suppose a country has fixed exchange rate and no capital controls. The country has kept the...
Suppose a country has fixed exchange rate and no capital controls. The country has kept the value of its currency below its market level. (a) Why is it easier for a country to undervalue its currency than to overvalue it? (b) What is the (intended) effect of this policy on current account, capital account, overall balance of payments and international reserves? (c) What will be the effect on current account, capital account, balance of payments and international reserves if the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT