their advanced industrial sector‚ which accounts for the bulk of energy usage). The fall of the dollar U.S. economic policies had an important effect on the crisis. While the OPEC boycott was an immediate trigger‚ historians increasingly see the crisis as being rooted in American economic policies. Oil‚ especially from the Middle East‚ was paid for in United States dollars‚ at prices fixed in dollars. U.S. President Richard Nixon had inherited an economy in which growth was already sluggish‚ in
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1. Explain how exchange rate targeting by the central bank can affect the balance of payment position of a country (Hint: Consider the current and the capital accounts) Exchange rate targeting is whereby the exchange rate becomes the nominal anchor. The subject of the most favorable monetary regime for small open developing economies is still widely discussed. The advantages and disadvantages of different exchange rate regimes are far too many to be readily captured and used to come up with a specific
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References: Alexander‚ S.S. (1952). Effects of a Devaluation on a Trade Balance. International Monetary Fund Staff Papers‚ 2‚ 263-278. Alexander‚ S.S. (1959). Effects of a Devaluation: A Simplified Synthesis of Elasticities and Absorption Approaches. American Economic Review‚ 49‚ 21-42. Bahmani-Oskooee‚ M. (1991). Is There a Long-Run Relation Between the Trade Balance
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‘beggar-thy-neighbor” devaluation c) dirty float d) target-zone agreement Ans: d Section: Target-zone agreement Level: Easy 3.4 ________ is nonconvertible paper money backed only by faith in the monetary authorities. a) Specie b) Fiat money c) Seignorage d) Par value Ans: b Section: The classical gold standard Level: Easy 3.5 Under the classic gold standard‚ if prices began rising in the U.S. a) the dollar value of the pound would rise b) the dollar value of the pound would
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government default in its debt‚ the banking system was almost about to collapse‚ and the Argentine peso which was pegged at par with the US dollar‚ reached lows of Arg $3.90 per US dollar. This crisis had a major impact on the international economy as well. Countries that were investing in Argentina because of their stable economy and their peg with the US dollar‚ started to leave and to take all their money with them. Argentina is an interesting country to analyze because even though they are full
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1/30/2014 Hang Pham- A00366703 What is President Kennedy’s U.S. balance of payment problem? In the 1960s‚ the United States was experiencing the balance of payment problem when its trade balance was in a substantial deficit‚ the US dollar was under an attack and a massive amount of gold flew out of its official reserve. Such issues in the balance of payment if exist for a long time can be a threat to the whole economy because balance of payment closely interacts with key macroeconomic
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bank which fixes its currency exchange rate against the reserve currency by trading domestic for foreign asset when necessary. In this case the central bank fixed the dollar exchange rate of its currency by trading domestic currency for dollar assets. In the foreign exchange market‚ the central bank fixed the currency ’s dollar price‚ and so the exchange rate was automatically fixed through arbitrage. The Floating Exchange Rate The floating exchange rate system (since 1973)
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the nominal exchange rate. It is defined as the rate at which one currency can be converted‚ or ’exchanged ’‚ into another currency. For example‚ the pound is currently worth about 1.824 US dollars. One pound can be converted into 1.824 dollars. This is the exchange rate between the pound and the dollar. There are four types of currencies can be operated‚ which are a floating‚ managed and fixed exchange rate. Lots of developed industrial nations like US ($)‚ UK (???) and Japan (??￥) operate
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100 local currency units per ounce of gold‚ that country could have 100‚000‚000 local currency units outstanding. Any change in its holdings of gold needed to be matched by a change in the number of local currency units outstanding. 2. Causes of devaluation. If a country follows a fixed exchange rate regime‚ what macroeconomic variables could cause the fixed exchange rate to be devalued? The following macroeconomic variables could cause the fixed exchange rate to be devalued: C C C 3. An interest
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Vietnam faces more price hikes despite inflation woes Vietnam’s government is set to raise electricity prices by 15% on Tuesday‚ at a time when the population is already struggling with a soaring cost of living. Last week the Vietnamese government also raised the retail prices of oil products by as much as 24%. In February‚ inflation hit a two-year high of 12.31%. Analysts say despite the government’s measures to tighten monetary policy‚ price pressures are likely to continue. "The increases
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