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Experiencing a tendency towards a balance of payments

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Reference no: EM131704757

(a) Critically comment on the following statement. "A country that does not share a currency union's business cycle should keep its own currency".

(b) "If an economy is experiencing a tendency towards a balance of payments deficit its real exchange rate will have to increase". Compare and contrast the way that this is brought about under a fixed and a flexible exchange rate regime.

(c) Why could a system of flexible exchange rates be inflationary?

Reference no: EM131704757

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