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Econ 476 Assignment 2

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solution.


Question

1. Discuss the pros and cons of fixed exchange rate systems and flexible exchange rate

 

systems.

 

2. What happens to domestic income in the AS–AD model when the price of a critical,

 

imported, intermediate input suddenly rises? (Assume the demand for the input is

 

inelastic.)

 

3. Low-income nations have a dilemma as to whether to fix or float the currency

 

exchange rates. There are many factors that affect their decisions and how

 

effectively they can manage a financial system. Discuss a few of these factors that

 

contribute to the success of a policy.

 

4. Historically the gold standard was the anchor for nearly every traded currency.

 

Explain how the gold standard worked as nations traded domestically and

 

internationally at fixed exchange rates.

 

5. Some remedies and preventive measures have been put forth to slow or forestall

 

currency crises, such as capital controls and intermediate regimes (i.e., fixed or

 

floating exchange rates). Discuss these measures and comment on whether they

 

would be effective. Explain why or why not.

 

Paper#78006 | Written in 29-Jan-2016

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