Author Question: Explain each of the following and why each might be used: hard pegs, currency boards, and ... (Read 61 times)

Redwolflake15 · **on:** Jun 30, 2018

Explain each of the following and why each might be used: hard pegs, currency boards, and dollarizations.

What will be an ideal response?

Question 2

Which of the following is always true after an economy reaches a balanced growth equilibrium?

A) the growth rate of output equals the rate of depreciation
B) population growth is zero
C) the growth rate of capital is equal to the growth rate of the effective work force
D) the growth rate of capital is equal to the savings rate
E) none of the above

Melissahxx · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A hard peg is a fixed exchange rate regime where policy makers, in some way, have made it symbolically or technically harder to change the peg. A dollarization occurs when the domestic currency is replaced by a foreign currency (typically the dollar). Under a currency board, the central bank is prepared to exchange foreign currency for domestic currency at some official rate. Furthermore, the central bank cannot engage in open market operations.

Answer to Question 2

C