Suspension of international trading and financial activities

Assignment Help Business Economics

Reference no: EM13831114

Large-scale wars typically bring a suspension of international trading and financial activities. Exchange rates lose much of their relevance under these conditions, but once the war is over governments wishing to fix exchange rates face the problem of deciding what the new rates should be. The PPP theory has often been applied to this problem of postwar exchange rate realignment. Imagine that you are a British Chancellor of the Exchequer and World War I has just ended. Explain how you would figure out the dollar/pound exchange rate implied by PPP. When might it be a bad idea to use the PPP theory in this way?

Reference no: EM13831114

Questions Cloud

Measuring performance : If public opinion surveys show that the majority of Americans regard inflation as a more serious threat than unemployment: Does this imply that the majority of Americans would rather be unemployed in a period of stable prices than employed in a time ..

List of nonrival private goods : Which of the following is a list of nonrival private goods only? Economic theory suggests that college graduates receive higher wages than those with only a high school education because:

What is the growth rate of total factor productivity : The current population of the United States is 318.9 million with 3% of the population is engaged in R&D at an efficiency rate of 1/500 per million persons per year. If R&D is the only source of total-factor productivity growth what is the growth rat..

Nominal interest rates are quoted at a variety of maturities : Nominal interest rates are quoted at a variety of maturities, corresponding to different lengths of loans. For example, in late 2004 the U.S. government could take out ten year loans at an annual interest rate of a bit over 4 percent, whereas the ann..

Suspension of international trading and financial activities : Large-scale wars typically bring a suspension of international trading and financial activities. Exchange rates lose much of their relevance under these conditions, but once the war is over governments wishing to fix exchange rates face the problem o..

What are benefits and drawbacks of having health program : What are the benefits and drawbacks of having a health program that varies by state versus having one that is uniform across the country? Do you find that the positives of state flexibility outweigh the negative or vice versa?

Government imposes a price floor above the market price : When the government imposes a price floor above the market price, the result will be that:

Cross-price elasticity of demand between goods : Suppose the cross-price elasticity of demand between goods X and Y is 2. How much would the price of good Y have to change in order to change the consumption of good X by 50 percent?

What is the average product of labor : What is the average product of labor, given that the level of labor equals 5, total output equals 500, and the marginal product of labor equals 25?

User Account

All Pages