Question 17 options: ---------- is the technique of protecting against the potential losses that result from adverse changes in exchange rates

What is the purchasing power parity exchange rate?

Does a higher inflation rate in an economy, other things being equal, affect the exchange rate of its currency? If so, how?

Do you think that a country experiencing hyperinflation is more or less likely to have an exchange rate equal to its purchasing power parity value when compared to a country with a low inflation rate?

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?

What is the difference between a floating exchange rate, a soft peg, a hard peg, and dollarization?

What are some of the reasons a central bank is likely to care, at least to some extent, about the exchange rate?

Suppose Argentina gets inflation under control and the Argentine inflation rate decreases substantially. What would likely happen to the demand for Argentine pesos, the supply of Argentine pesos, and the peso/U.S. dollar exchange rate?

What would make a country decide to change from a common currency, like the euro, back to its own currency?

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?