This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Explain why after, say Norway unilaterally pegs the krone to the euro, domestic money market ... (Read 30 times)

lindiwe

  • Hero Member
  • *****
  • Posts: 577
on: Jun 30, 2018
Explain why after, say Norway unilaterally pegs the krone to the euro, domestic money market disturbances will no longer affect domestic output despite the continuation of float-rate regime against non-euro currencies.
 
  What will be an ideal response?

Question 2

Explain why when Norway unilaterally fixes its exchange rate against the euro but leaves the krone free to float against the non-euro currencies, it is unable to keep at least some monetary independence.
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

lkoler

  • Sr. Member
  • ****
  • Posts: 358
Reply #1 on: Jun 30, 2018
Answer to Question 1

Because Norway's interest rate must equal the euro interest rate, any pure shifts in the AA curve (see chapter 19 ) will result in immediate reserve inflows or outflows that leave Norway's interest rate unchanged.

Answer to Question 2

Any independent money supply change in Norway would put pressure on krone interest rates and thus on the krone/euro exchange rate. So by pegging the krone even to a single foreign currency, Norway completely surrenders its domestic monetary control.


lindiwe

  • Hero Member
  • *****
  • Posts: 577
Reply #2 on: Jun 30, 2018
Correct answers!


lkoler

  • Sr. Member
  • ****
  • Posts: 358
Reply #3 on: Jun 30, 2018
Great! Please up vote :D


« previous next »
 

Did you know?

There are major differences in the metabolism of morphine and the illegal drug heroin. Morphine mostly produces its CNS effects through m-receptors, and at k- and d-receptors. Heroin has a slight affinity for opiate receptors. Most of its actions are due to metabolism to active metabolites (6-acetylmorphine, morphine, and morphine-6-glucuronide).

Did you know?

The highest suicide rate in the United States is among people ages 65 years and older. Almost 15% of people in this age group commit suicide every year.

Did you know?

All adults should have their cholesterol levels checked once every 5 years. During 2009–2010, 69.4% of Americans age 20 and older reported having their cholesterol checked within the last five years.

Did you know?

Although the Roman numeral for the number 4 has always been taught to have been "IV," according to historians, the ancient Romans probably used "IIII" most of the time. This is partially backed up by the fact that early grandfather clocks displayed IIII for the number 4 instead of IV. Early clockmakers apparently thought that the IIII balanced out the VIII (used for the number 8) on the clock face and that it just looked better.

Did you know?

Many supplement containers do not even contain what their labels say. There are many documented reports of products containing much less, or more, that what is listed on their labels. They may also contain undisclosed prescription drugs and even contaminants.

Historian James Merrell notes several errors in Benjamin West’s famous 1771 painting, William Penn’s Historian James Merrell notes several errors in Benjamin West’s famous 1771 painting, William Penn’s
A slave market in Marrakesh, Morocco. This lithograph is from the 1800s. A slave market in Marrakesh, Morocco. This lithograph is from the 1800s.
Reconstruction Drawing of Trajan's Market Reconstruction Drawing of Trajan's Market
A close relationship between greenhouse gas emissions and a country’s gross domestic product A close relationship between greenhouse gas emissions and a country’s gross domestic product
PV cells have potential for domestic and commercial use PV cells have potential for domestic and commercial use
Stock Market Tracks Growth in GDP Stock Market Tracks Growth in GDP
Video: B cells and antibodies

For a complete list of videos, visit our video library