Which of the following is impossible for a country to choose simultaneously? Question 17 options: fixed exchange rate, free capital flows, and an independent monetary policy flexible exchange rate, free capital flows, and an independent monetary policy fixed exchange rate, capital controls, and an independent monetary policy fixed exchange rate, free capital flows, and a monetary policy subject to keeping the exchange rate unchanged.

Which of the following is impossible for a country to choose simultaneously? Question 17 options: fixed exchange rate, free capital flows, and an independent monetary policy flexible exchange rate, free capital flows, and an independent monetary policy fixed exchange rate, capital controls, and an independent monetary policy fixed exchange rate, free capital flows, and a monetary policy subject to keeping the exchange rate unchanged.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: International Trade And Finance

Section: Chapter Questions

Problem 15SQ

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List some advantages and disadvantages of the different exchange rate policies.
In the context of international economics, which scenario best illustrates the concept of "currency pegging"? a) Country A decides to fix its exchange rate to the US dollar and maintains this rate through central bank interventions. b) Country B allows its currency value to fluctuate freely based on market forces of supply and demand. c) Country C adopts the euro, replacing its national currency as part of the European Union. d) Country D's currency value fluctuates in response to changes in its gold reserves.
Naked Economics: Undressing the Dismal Science Book by Charles Wheelan In chapter 11, "International Economics," of Naked Economics, Charles Wheelan discusses international exchange rates and PPPs (Purchasing Power Parity). Based on the discussion of these two ideas in this chapter which of the below statements would you consider to be INCORRECT? A) The rate at which one currency can be exchanged for another is the exchange rate. B) Exchage rates include only the values of internationally tradable items, while the PPP includes both internationally tradable items as well as those which are not internationally tradable items but are used by people in different countries. C) If $25 can purchase a bundle of goods in the U.S. and if a comparable bundle of goods wil cost 750 rubles in Russia, then the PPP between the U.S. dollar and the Russian ruble would be $25=750 Russian rubles. D) The PPP only focuses on internationally tradable items, while the exchange rate has a…
Identify two factors (or characteristics of economy) that underlie a nation’s decision to adopt a fixed exchange rate or a floating exchange rate.
In the Mundell–Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when the money supply is reduced. What would happen if exchange rates were fixed rather than floating? (question from Macroeconomics)
We noted that in 1900, the fixed exchange rate between the British pound and the U.S. dollar was 1 pound equals $5. What is the exchange rate today? Whose currency has gained the most in purchasing power? What caused this dramatic change in the exchange rate?
Country A follows a fixed exchange rate policy that pegs its currency to the currency of country B, which is its main trading partner in a world where international capital is fully mobile. However, due to unresolved structural inefficiencies (for example, excessive bureaucracy), prices in country A tend to increase more than prices in country B. Over time, if nothing else changes, and provided that country A is committed to its current exchange rate policy, which of the following problems is not anticipated for country A? a. Economic recession. O b. Growing deficit in international trade balance. c. Worsening inflation. Od. Decreasing reserve assets. Oe. Growing external indebtedness.
In the context of the monetary approach to the determination of the exchange rate, what is the effect on the price level, interest rate and exchange rate from a permanent contraction in the domestic level of the money supply? How does your previous answer modify if, instead of the level, it is the domestic growth rate of the money supply that contracts permanently? How do your previous answers modify if we drop the assumption of PPP?
This question concerns the mechanism of a reserve currency standard. Two countries, X and Y, have two currencies, x and y, fixed to the reserve currency, the U.S. dollar. Suppose the exchange rate between x and the U.S. dollar is 3x per dollar. Suppose the exchange rate between y and the U.S. dollar is 5y per dollar. Explain (using numbers) the mechanism if the x-y exchange rate was 0.5 x per y.
Who would demand U.S. dollars in the foreign exchange market? U.S. firms and households wishing to purchase foreign goods and services Foreigners wishing to purchase U.S goods and services U.S. households wishing to purchase U.S. goods and services
Which of the following statements is true? An advantage of a fixed exchange rate system is that governments are required to constantly intervene in the foreign exchange market to maintain exchange rates within specified boundaries. An advantage of a fixed exchange rate system is that governments are not required to constantly intervene in the foreign exchange market to maintain exchange rates within specified boundaries. A disadvantage of a fixed exchange rate system is that governments are not required to constantly intervene in the foreign exchange market to maintain exchange rates within specified boundaries. A disadvantage of a fixed exchange rate system is that governments are required to constantly intervene in the foreign exchange market to maintain exchange rates within specified boundaries.
Is a country for which imports and exports comprise a large fraction of the GDP more likely to adopt a flexible exchange rate or a fixed (hard peg) exchange rate?

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	fixed exchange rate, free capital flows, and an independent monetary policy
	flexible exchange rate, free capital flows, and an independent monetary policy
	fixed exchange rate, capital controls, and an independent monetary policy
	fixed exchange rate, free capital flows, and a monetary policy subject to keeping the exchange rate unchanged.