State in brief about the monetary effects, Business Law and Ethics

Assignment Help:

State in brief aboput the Monetary Effects

Besides real income effects there will also be monetary effects if nations seek to intervene in foreign exchange markets which government do to influence value of their exchange rate. This is done by either buying or selling foreign exchange. However, as foreign exchange constitutes part of a country's high powered money supply this affects the quantity of money in the economy. If the country has less than fully flexible exchange rates this provides another linkage between countries. If a country is expanding its domestic money supply which results in an increase in its imports. This will improve the balance of payments of the foreign countries with whom it is trading. In the absence of exchange rate intervention the value of the foreign currency may appreciate against the country's currency.

If this is viewed as undesirable the overseas government will sell its own currency and buy the country's currency on foreign exchange markets. The effect will be that the foreign country will go on accumulating the country's currency. The result will be an expansion in its level of high powered money. This is turn will lead to a multiple expansion in that country's own money supply. Clearly, domestic monetary policy affects aggregate demand and economic welfare in other countries. Only if exchange rates are completely flexible will there be no monetary effects.

 


Related Discussions:- State in brief about the monetary effects

Explain the term - policy change, Explain the term - Policy change The ...

Explain the term - Policy change The role of the policy entrepreneur has several implications for our understanding of the policy process. While social scientists often look to

Directors powers, Directors Powers: Equity regards directors as holdin...

Directors Powers: Equity regards directors as holding their powers on trust for the company. They can only exercise those powers for the benefit of the company, otherwise the

Hire-purchase law, Hire-Purchase Law A person who wants to buy goods t...

Hire-Purchase Law A person who wants to buy goods through does not have the like "money consideration" prescribed through the Sale of Goods Act like their price may enter in a

How much damages should be awarded, X Co. is a retail dealer of garden trac...

X Co. is a retail dealer of garden tractors. Mr. Y signs a contract to buy a garden tractor for $400 but later backs out of the agreement. The tractor that Y agreed to buy is subse

Guide - african customary law, Guide - African Customary Law Furth...

Guide - African Customary Law Further the courts are to be "guided" through African customary law.  Conversely this provision provides a judge discretion whenever to allow

The impact of behaviour on the policy agenda, The impact of behaviour on th...

The impact of behaviour on the policy agenda To see the impact of behaviour, on the policy agenda and outcomes, which is generally not apparent, one way is to focus on the basi

Resolution to wind up voluntarily, Resolution to Wind Up Voluntarily: ...

Resolution to Wind Up Voluntarily:  The type of resolution to be passed varies with the circumstances of the case, as provided in s.271(1): (a) If the articles provide for

Mode of alteration, Mode of Alteration:  The alteration of capital may...

Mode of Alteration:  The alteration of capital may be made by - 1) Increasing the company's share capital by new shares of such amount as the resolution prescribes; or 2

Purpose and advantage of monitoring, Explain what are the primary & seconda...

Explain what are the primary & secondary sources of information that you can use to conduct your research. If it is primary/secondary, or both state reasons for your answer.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd