State the case for and the case against currency bailouts.
What will be an ideal response?
The case for a currency bailout rests on the idea that weakness in one currency can undermine others, creating a domino effect. Critics of bailouts argue that they are ultimately self-defeating because a country that knows that it will receive a bailout is less likely to pursue unpopular policy adjustments (such as high interest rates, tax hikes, government spending cuts, lower trade barriers, regulation of monopoly power, or tighter lending policies) that might stabilize its currency.
You might also like to view...
An exchange rate that varies according to supply and demand for the currency in the foreign exchange market is called a ________ exchange rate.
A. flexible B. nominal C. real D. fixed
Which of the following statements is FALSE?
A) Both monetary and interest rate targets cannot be pursued simultaneously. B) A reduction in the required reserve ratio increases the money supply and pushes down the equilibrium interest rate. C) An open market sale decreases the money supply and pushes up the equilibrium interest rate. D) An open market purchase reduces the money supply and pushes down the equilibrium interest rate.
A true public good is characterized by
a. depletability but not excludability. b. excludability but not depletability. c. both depletability and excludability. d. neither depletability nor excludability.
Which of the following will both make people buy more?
a. wealth and interest rates rise. b. wealth rises and interest rates fall. c. wealth falls and interest rates rise. d. wealth falls and interest rates fall.