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Q. Present the case for floating exchange rates.
Answer:
1. Monetary policy autonomy
Governments would able to use financial policy to reach internal and external balance. No country possible forced to import inflation and deflation from abroad.
2.Symmetry
The United States would no longer is able to set world monetary conditions all by itself. The United States would have the similar opportunity the same as other countries to influence its exchange rate against foreign currencies.
3. Exchange rates like automatic stabilizers.
The agonizing and long periods of speculation preceding exchange rate realignments wouldn't take place under floating.
Q. Explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates. Answer: Using the GG - LL framework
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Q. How much trade do currency unions create? Answer: The major result is that currency unions promote trade. One study originate that on average two countries that are
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Q. Explain the purpose of the following figure. Show the effects of German unification on Germany's interest rate. Answer: The major purpose is to show that different i
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