Question
In: Economics
Changes in the value of a nation’s currency affect the nation’s net exports, and thus GDP....
Changes in the value of a nation’s currency affect the nation’s net
exports, and thus GDP. How might this make a large country, like
the US, more willingly to adopt a flexible exchange rate regime
than a small country, like Belgium.
Solutions
Expert Solution
GIVEN THAT:
FREE FLOATING EXCHANGE RATE:
Refers to the exchange rate where market runs according to demand and supply of currency and government don't intervene.
WHY US HAS MORE WILL TO ADOPT FLEXIBLE EXCHANGE RATE AND WHY SMALLER COUNTRY RESIST...
1.It enables the exchange rates to automatically adjust according to market needs, demands and supply.
2. It cushions the impact of large swings in demand and supply.
3. It insulates the economy from the negative impact of international events .
HOWEVER SMALL COUNTRY ARE APPREHENSIVE REGARDING FREE FLOATING BECAUSE:
1. Floating Exchange Rate are unpredictable and unstable.
2. It increases foreign exchange volatility
3. Business investment and planning are risky as one is not certain about future exchange rates.
4. Extreme appreciation and depreciation of currency calls for government intervention thus, managed floating is adopted .
Rahul Sunny answered 6 months agoRelated Solutions
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b.
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Components of GDP: Consumption, Investment, Government purchases, Net Exports What components of GDP (if any) would...
Components of GDP: Consumption, Investment, Government
purchases, Net Exports
What components of GDP (if any) would each of the
following transactions affect? Explain. Copy and paste your answers
below.
1. A family buys a new refrigerator.
2. Aunt Jane buys a new house.
3. Ford sells a mustang from its inventory.
4. You buy a pizza.
5. California repaves Highway 101.
6. Your parents buy a French bottle of
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7. Honda expands its factory in Marysville,
Ohio.
8. I...
Describe how the following transactions would affect U.S. exports, imports, and net exports: Students in Prague...
Describe how the following transactions would affect U.S.
exports, imports, and net exports: Students in Prague flock to see
the latest movie from Hollywood. Mrs. Jones in Philadelphia buys a
new Volvo. The student bookstore at Oxford University in England
sells a copy of a U.S. printed/authored textbook A Canadian citizen
shops at a store in northern Vermont to avoid Canadian sales taxes.
An American art professor spends the summer touring museums in
Europe. Please do not copy one of...
Describe how the following transactions would affect U.S. exports, imports, and net exports: Students in Prague...
Describe how the following transactions would affect U.S.
exports, imports, and net exports:
Students in Prague flock to see the latest movie from
Hollywood.
Mrs. Jones in Philadelphia buys a new Volvo.
The student bookstore at Oxford University in England sells a
copy of a U.S. printed/authored textbook
A Canadian citizen shops at a store in northern Vermont to
avoid Canadian sales taxes.
An American art professor spends the summer touring museums in
Europe.
Describe how the following transactions would affect U.S. exports, imports, and net exports: Students in Prague...
Describe how the following transactions would affect U.S.
exports, imports, and net exports:
Students in Prague flock to see the latest movie from
Hollywood.
Mrs. Jones in Philadelphia buys a new Volvo.
The student bookstore at Oxford University in England sells a
copy of a U.S. printed/authored textbook
A Canadian citizen shops at a store in northern Vermont to
avoid Canadian sales taxes.
An American art professor spends the summer touring museums in
Europe.
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