Write down a model that will allow you to analyze the BOP and exchange rate in a monetary framework. Then, discuss the consequences of an increase in the foreign inflation rate under fixed, flexible, and managed floating systems
What will be an ideal response?
R^ - E^ = P^F + Y^ - D^. If P^F increases, then with fixed rates R^ increases. With a float, E^ falls. With a managed float, (R^ - E^) increases with both R^ increasing and E^ falling.
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The key components of a tradeable pollution permit system include
a. a deposit that covers the MEC of improper waste disposal b. the issuance of a fixed number of permits c. a means through which permits can be exchanged among polluters d. all of the above e. (b) and (c) only
Suppose a Big Mac costs $4.20 in the United States and 9.55 zlotys in Poland. If the exchange rate is 2.77 zlotys per dollar, purchasing power parity predicts that
A) the dollar is undervalued. B) the zloty is undervalued. C) the zloty is overvalued. D) both the dollar and the zloty are undervalued.
Suppose a bank has $850 million in vault cash and a deposit in the Fed of $100 million. If the bank's required reserves equal $500 million, then the bank has excess reserves of:
a. $100 million. b. $350 million. c. $400 million. d. $450 million. e. $500 million.
When most people talk about believing in equality of income, they mean they believe in equality of:
A. after-tax income for comparably endowed individuals. B. before-tax income for comparably endowed individuals. C. effort for comparably endowed individuals. D. opportunity for comparably endowed individuals.