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What is the effect of policy change on exchange rate value

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Reference no: EM131122578

Economics of International Trade

1. A country has a floating exchange rate. Government spending now increases in an effort to reduce unemployment. What is the effect of this policy change on the exchange rate value of the country's currency? Under what circumstances does the exchange rate change reduce the expansionary effect of the fiscal change?

2. If most countries adhered to a system of fixed exchange rates, global inflation would be lower. Do you agree or disagree with that statement, and why or why not?

Reference no: EM131122578

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