Decide whether the U.S dollar would appreciate or depreciate compared to the Mexican peso in each scenario. Assume flexible exchange rates.
1. American tourists head to Mexican beaches for the spring.
2. Mexico's money supply drops sharply.
3. Taxes on corporations in the U.S are cut. They are now lower for business investment than Mexico.
4. Drug violence discourages Americans from traveling to Mexico.
23. The basic type of intervention by central banks under the managed floating exchange rate system is to:
A. The central bank or government simply changes the peg for exchange rates.
B. Buy and sell currencies to influence supply and demand.
C. Renegotiate the rate at which foreign currencies can be converted into gold.
D. Make pronouncements but then do nothing and let the market set the exchange rate.
Decide whether the U.S dollar would appreciate or depreciate compared to the Mexican peso in each scenario. Assume flexible exchange rates.
1. American tourists head to Mexican beaches for the spring.
2. Mexico's money supply drops sharply.
3. Taxes on corporations in the U.S are cut. They are now lower for business investment than Mexico.
4. Drug violence discourages Americans from traveling to Mexico.
23. The basic type of intervention by central banks under the managed floating exchange rate system is to:
A. The central bank or government simply changes the peg for exchange rates.
B. Buy and sell currencies to influence supply and demand.
C. Renegotiate the rate at which foreign currencies can be converted into gold.
D. Make pronouncements but then do nothing and let the market set the exchange rate.
