Determine the term - fixed exchange rates, Business Law and Ethics

Determine the term - Fixed Exchange Rates

With a fixed exchange rate adjustment toward long run equilibrium occurs via monetary effects. This effect is shown in Figure 9.1. At point B country A is running a balance of payments deficit. In order to stop its exchange rate from depreciating the monetary authorities in that country must buy its domestic currency and sell foreign exchange. This will reduce the amount of high power money in that economy and cause a multiple contraction in the domestic money supply. This is shown by a leftward shift of the LM curve. In country B this process is reversed causing its domestic money supply to increase and its LM curve to shift to the right. These adjustments continue until both economies return to long run equilibrium at point C. At this point both countries experience balance of payments equilibrium, and their domestic rates of interest equal the world rate of interest. With balance of payments equilibrium neither country need intervene any further in foreign exchange markets and so each country's domestic money supply remains unchanged.


Posted Date: 10/1/2013 1:20:13 AM | Location : United States

Related Discussions:- Determine the term - fixed exchange rates, Assignment Help, Ask Question on Determine the term - fixed exchange rates, Get Answer, Expert's Help, Determine the term - fixed exchange rates Discussions

Write discussion on Determine the term - fixed exchange rates
Your posts are moderated
Related Questions
What are the types of international law? Two main types of international laws are there, it is public international law and private international law. Public law is law th

Golden rule: Conversely the so-called 'golden' rule will be utilized through the court in order to avoid arriving on an absurd decision under the literal rule of construction.

Qualifications of Judge Hence for qualify to appointment as a judge of the High Court a person must either be as; An advocate of the High Court or may Have b

Tort law and Employment law: Pat, a builder, is an employee of Tom's. One day on site the scaffolding that Pat is standing on collapses and he suffers personal injuries. The s

Distribution of Surplus Assets: If the debts are paid in full the liquidator should apply what remains in repayment of capital paid on shares and then distribute any residue t

What is the prospective  why should they be liable , how the sings for emerge of ISP from the safe horbor either DMCA or Directive in Eu has been come within the court? What is

Reservation of Name:                             To obviate the risk of choosing a name that ultimately turns out to be undesirable, the promoters should enquire from the regi

Disadvantages of Statute Law: Imposition of law However some Acts are imposed on the people and reflect the views of the pundits or Executive in the ruling political part

Inflationary Bias Another potential problem with the coordination of monetary policy is that it can worsen the inflationary bias within each country. If the costs associated wi

Presumed Agency or from Cohabitation Whether a woman who is living with a man is deemed that  be his agent for purposes of acquire necessaries to the family; marriage is not n