Why under fixed exchange rate is ineffective, International Economics

Assignment Help:

Q. Explain why under fixed exchange rate, monetary policy is ineffective whereas under floating exchange rate it is effective in rising output.

Answer:  In floating by purchasing domestic assets the central bank cause an initial excess supply of domestic money that concurrently pushed the domestic interest rate downward and weakens the currency.  Though under fixed exchange rate the central bank will oppose any tendency of the currency to depreciate by selling foreign assets for domestic money and consequently removing the initial excess supply of money its policy move has caused.


Related Discussions:- Why under fixed exchange rate is ineffective

Effects of a permanent increase in the u.s. money supply, Q. Explain the ef...

Q. Explain the effects of a permanent increase in the U.S. money supply in the short run and in the long run. Assume that the U.S. real national income is constant. A raise in

Effect on gdp, The recessionary gap in a country is $1 trillion. The spendi...

The recessionary gap in a country is $1 trillion. The spending multiplier is 5. For every $50 billion borrowed, interest rates increase by 0.1 %. For every 0.1% increase in interes

Rasons for economic miracle of east asian countries, Q. Illustrate the rea...

Q. Illustrate the reasons for the economic "miracle" of the East Asian countries between 1960 and 1997. Is it only due to the common Asian practice of industrial policy and busin

Economical development, You can work on this on your own, or with one partn...

You can work on this on your own, or with one partner.  If there are more than two names on the submitted work, then I will give a maximum grade of 60 to each person listed on the

Opportunity cost theory of haberler, What is mean by opportunity cost model...

What is mean by opportunity cost model of haberler international treade

Evaluate the economic policies of juan peron, Q. Evaluate the economi...

Q. Evaluate the economic policies of Juan Peron, the husband of the famous Evita? Answer: Once Peron got the power in 1946 in Argentina the economy that at that time

Economic investigations report, The latest economic investigations report t...

The latest economic investigations report that the recent earthquake, tsunami and nuclear disaster have led to an economic recession in Japan. This recession may reduce the demand

Risk of financial crisis, Q. Discuss the role of more "transparency" ...

Q. Discuss the role of more "transparency" in reducing the risk of financial crisis. Answer: Must discuss the Asian crisis where foreign banks lent money to Asian enter

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