Exam 20: Exchange Rate Regimes

For this question,assume that exchange rates are flexible and that the exchange rate expected to occur in one year is not constant.Suppose that individuals now expect that the foreign central bank will pursue expansionary monetary policy in one year.This expected future monetary expansion by the foreign central bank will cause which of the following to occur?

Which of the following is an argument of opponents of devaluations?

Suppose the country that pegs its currency has an overvalued real exchange rate and that output is currently above the natural level of output.Which of the following will occur as the economy adjusts to this situation?

In a fixed exchange rate regime,a reduction in the price level will cause which of the following?

In a fixed exchange rate regime,which of the following policies could lead to a greater trade deficit and leave aggregate demand constant?

During the EMS crisis in 1992,

Policy makers can select from a number of different exchange rate regimes.One of those options is a "hard peg." Which of the following best represents a hard peg?

A country which does not devalue when financial markets expect it to will probably suffer

Suppose a country that has been pegging its currency is faced with a situation where financial market participants now expect some future revaluation.In such a situation,we would generally expect which of the following to occur?