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5 Jan 2018

How does a fixed exchange rate system work? Who holds the exchange rate fixed and how? Why might a country want to hold its exchange rate fixed?

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Deanna Hettinger
Deanna HettingerLv2
5 Jan 2018
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Related questions

Question 7

(a) “A floating exchange rate can insulate a country from foreign trade disturbances, while a fixed exchange rate can insulate a country from internal monetary disturbances.” Explain. (4 marks)

(b) “If an economy is experiencing a tendency towards a Balance of Payments deficit its real exchange rate will have to increase”. Compare and contrast the way that this is brought about under a fixed and a flexible exchange rate regime. (4 marks)

(c) Why could a system of flexible exchange rates be inflationary? (2 marks)

What is a fixed exchange-rate system? What are some examples of it, and how does it help a country using it?

13) If a country's central bank does not intervene in the foreign exchange market, the country has A) a fixed exchange rate policy. B) a flexible exchange rate policy. a responsible exchange rate policy. D) a crawling peg exchange rate policy. E) no exchange rate policy.

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