Exam 15: Exchange Rate Systems and Currency Crises

Suppose that Kenya uses a floating exchange rate and experiences high capital mobility.Assume that Kenya is experiencing a recession and high inflation.In order to achieve overall balance, other things equal, Kenya will likely need to implement

The Plaza Agreement of 1985 and Louvre Accord of 1987 are examples of

Exchange rate management policies require international policy coordination because a depreciation of one nation's currency implies an appreciation of its trading partner's currency.

Expenditure-switching policies include currency revaluation, currency devaluation, and direct controls such as tariffs, quotas, and subsidies.

The appropriate expenditure-switching policy to correct a trade deficit is

Currency devaluation and revaluation primarily affect the economy's current account and have secondary effects on domestic employment and inflation.

Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency.Other things equal this causes the

Assume a system of floating exchange rates and high capital mobility.In response to relatively high interest rates abroad, suppose domestic investors place their funds in foreign capital markets.Other things equal, the result would be

When the economy is in deep recession or depression, it is operating on that portion of its aggregate supply curve that is horizontal.

What happens to the balance of payments under a fixed exchange rate system, when expansionary or contractionary monetary policy is used?

Given an open economy with high capital mobility, fiscal policy is strengthened under fixed exchange rates.

Given fixed exchange rates, assume Mexico initiates contractionary monetary and fiscal policies to combat inflation.Other things equal, these policies will also

A system of fixed exchange rates and high capital mobility strengthens which policy in combating a recession?

Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary monetary policy is implemented to combat recession.Other things equal, the initial and secondary effects of the policy

Under a fixed exchange-rate system and high capital mobility, other things equal an expansionary fiscal policy leads to a

Given a system of floating exchange rates, other things equal an expansionary fiscal policy by the United States will cause

What is international economic policy coordination?

Suppose Brazil has a floating exchange rate, and it faces domestic inflation and a trade deficit.Assuming it desires overall balance, if Brazil shrinks its money supply, other things equal one would expect which of the following to occur?

Which of the following situations are likely to require direct controls to achieve overall balance?

A nation experiences external balance if it achieves