Question

In: Finance

A country may find it difficult to maintain a pegged exchange rate system in the face...

A country may find it difficult to maintain a pegged exchange rate system in the face of (Strong or Weak) economic conditions.

True or False: The value of many Asian currencies, that were pegged to the dollar in the 1990’s, could not be sustained during economic downturns.

True or False: In order to maintain the currency board, the interest rate in the two countries must be similar.

Solutions

Expert Solution

1. WEAK-. at the time of weak economic condition, the country will be finding it difficult to maintain pegged exchange rate system, as there will be too much pressure on the governments books of accounts.

2. TRUE- the given statement is true because value of many asian currencies failed because they were pegged to American Dollars at the time of crisis.

3. FALSE- given statement about currency board is FALSE because interest rate must not be similar in two countries.


Related Solutions

In order to maintain a pegged exchange rate in China: a. at least one foreign country...
In order to maintain a pegged exchange rate in China: a. at least one foreign country must also maintain a pegged exchange rate. b. no other country that China shares a geographical border with can maintain a pegged exchange rate. c. the Chinese government must prevent Chinese citizens from trading goods or services with other countries. d. the Chinese government must prevent Chinese citizens from purchasing assets denominated in foreign currencies. e. the Chinese government must adjust the supply of...
Explain the differences between a pegged or fixed exchange rate system and a floating exchange rate...
Explain the differences between a pegged or fixed exchange rate system and a floating exchange rate system. Provide several pros and cons of each. Provide examples of countries that use each strategy. [This is a Short Answer prompt.]
Explain the differences between a pegged or fixed exchange rate system and a floating exchange rate...
Explain the differences between a pegged or fixed exchange rate system and a floating exchange rate system. Provide several pros and cons of each. Provide examples of countries that use each strategy.
"Managed float is superior to pegged exchange rate system because it converses foreign exchange reserves in...
"Managed float is superior to pegged exchange rate system because it converses foreign exchange reserves in case of speculative attacks on the currency" - Comment with reason
Suggest the best exchange rate system for a country like Zambia.
Suggest the best exchange rate system for a country like Zambia.
(a) Explain whether exchange rate risk of Hong Kong dollars is zero as it is pegged...
(a) Explain whether exchange rate risk of Hong Kong dollars is zero as it is pegged with the U.S. dollars. (b) Explain how the U.S. government intervenes exchange rate indirectly to its boost economic growth.
Describe the monetary system: Classical gold standard, fixed exchange rates, pegged rates, floating exchange rates
Describe the monetary system: Classical gold standard, fixed exchange rates, pegged rates, floating exchange rates
identify two factors that may be contributing to exchange rate volatility in your country during the...
identify two factors that may be contributing to exchange rate volatility in your country during the last 12 months. b. if you were the economic for your business organisation, what advice would you give so as to mitigate the risks associated with exchange rate volatility over the next 12 months. substantiate your answer
a. identify two factors that may be contributing to exchange rate volatility in your country during...
a. identify two factors that may be contributing to exchange rate volatility in your country during south Africa in the last 12 months. b. if you were the economic for your business organisation, what advice would you give so as to mitigate the risks associated with exchange rate volatility over the next 12 months. substantiate your answer.
Exchange Rate Regimes. Be able to explain the types of exchange rate regimes that a country...
Exchange Rate Regimes. Be able to explain the types of exchange rate regimes that a country could choose from. Discuss the advantages and disadvantages of each (fixed vs. floating) and in particular, discuss who benefits from (or loses in) each type of system. Frame your discussion in terms of the “impossible trinity” (aka “the Trilemma”); that is, be able to discuss how the choice of exchange rate regimes relates to a country’s ability to conduct independent monetary policy and allow...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT