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Q. Present the case against floating exchange rates.
Answer:
1.The discipline obligatory on individual countries by a fixed rate would be lost.
2. Undermine speculation and money market disturbances.
3. Damages to investment and international trade.
4. A Clumsy economic policies.
5. The misapprehension of greater autonomy.
Q. Explain how an increase in the real exchange rate affects exports and imports. Answer: While the real exchange rate rises domestic products are cheaper relative to
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The Arguments for Flexible Exchange Rates
using diagrams, corden''s theory of customs union under conditions of oligopoly and within the existence of external economics of scale.
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