In 1991, Argentina decided to peg its currency (the Argentinean peso) to the U.S. dollar. Most of Argentina's trading, however, was with Brazil and Europe, not the United States. What result would pegging the Argentinean peso to the U.S
dollar have on the cost of imports from and exports to Brazil and Europe?
If Argentina pegs its currency to the dollar, the prices of the goods it purchases and the prices of the goods it sells to foreign countries will be determined by the value of the dollar. If the value of the dollar is rising relative to the euro and the Brazilian real, then Argentinean goods are also rising in price. The result will be a decrease in Argentinean exports to foreign countries (and an increasing current account deficit, as Argentina discovered).
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One of the major criticisms of the World Bank is that it lends funds
A) to countries which could easily borrow funds from other sources. B) to terrorist groups not affiliated with any country. C) to impoverished nations. D) to industrialized nations.
Which of the following factors strengthens the case for policy activism?
A) flexible wages B) lack of real-business-cycles C) sticky prices D) flexible prices
Although the reciprocal nature of the problem suggest that the proceeds of a corrective tax not be paid to as compensation to those harmed, if compensation is paid to those harmed by externalities _____
a. the payment should be made from general revenues to keep the corrective action separate from the compensatory part b. the payment should be set equal to marginal external cost c. the payment should be made in one lump sum to minimize incentives to create future problems d. the payment should be double the amount of the corrective tax to justly compensate the victims
Statistical analysis reveals that the long-run money velocity (for euro-area M3, which is equivalent to U.S. M2):
A. is much more stable in the U.S. than in the euro area. B. is unstable in the euro similar to the instability that exists in the U.S. C. has increased in the euro area since 1980. D. is more stable in the euro area than in the U.S.