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Author Question: Assume a country is in a fixed exchange rate regime. Now suppose that individuals expect that policy ... (Read 163 times)

rayancarla1

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on: Jun 30, 2018
Assume a country is in a fixed exchange rate regime. Now suppose that individuals expect that policy makers will devalue its currency. Explain the various actions that policy makers can choose in response to this expected devaluation.
 
  What will be an ideal response?

Question 2

Suppose output per worker in a country has grown at the same rate as technology over for many years. This country's growth would be described as
 
  A) appropriable growth.
  B) balanced growth.
  C) effective growth.
  D) diffuse growth.
  E) none of the above


billybob123

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Reply #1 on: Jun 30, 2018
Answer to Question 1

Policy makers can attempt to persuade (via official announcements) that they remain committed to pegging the currency at its current rate. Second, they may have to raise domestic interest rates to prevent any depreciation of the currency. Eventually, they may be forced to devalue because of the contractionary effects of the higher i.

Answer to Question 2

B


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