Coffee prices decrease honduran gdp

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Coffee is one of Honduras' main exports. Assume that coffee prices fall because of a drop in world demand.

a. Assume that Honduras fixes the value of its currency, the lempira, to the dollar. Provide one method that Honduras could use to fix the value of its currency when coffee prices fall.

b. Will the fall in coffee prices decrease Honduran GDP more if Honduras has fixed exchange rates or flexible exchange rates? Why?

Reference no: EM133124573

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