What step have been proposed to prevent exchange rate crises

Assignment Help Macroeconomics

Reference no: EM131480158

Question: 1. You are the economic advisor to Sir Bufton Tufton, the prime minister of Perfidia. The Bank of Perfidia is pegging the exchange rate of the local currency, the Perfidian albion. The albion is pegged to the wotan, which is the currency of the neighboring country of Wagneria. Until this week both countries have been at full employment. This morning, new data showed that Perfidia was in a mild recession, 1% below desired output. Tufton believes a downturn of 1% or less is economically and politically acceptable but a larger downturn is not. He must face the press in 15 minutes and is considering making one of three statements:

a. "We will abandon the peg to the wotan immediately."

b. "Our policies will not change unless economic conditions deteriorate further."

c. "We shall never surrender our peg to the wotan."

What would you say to Tufton concerning the merits of each statement?

2. What steps have been proposed to prevent exchange rate crises? Discuss their pros and cons.

Reference no: EM131480158

Questions Cloud

Watch the video - lives for sale- human trafficking : Watch the following segment from the "Lives for Sale: Human Trafficking" video.

Economic profit in the long run : Why do firms in perfectly competitive markets not make any economic profit in the long run? Would be smart for a firm to lower its price in a perfectly.

Conduct a complete strengths and opportunities analysis : Conduct a complete strengths, weaknesses, opportunities, and threats (SWOT) analysis JUST INCLUDING at least 15 factors from the "Opportunities".

Watch the video -the bill of rights- a living document : Watch the following segment from the "The Bill of Rights: A Living Document" video.

What step have been proposed to prevent exchange rate crises : You are the economic advisor to Sir Bufton Tufton, the prime minister of Perfidia. The Bank of Perfidia is pegging the exchange rate of the local currency.

What was the video about : Watch the following segment from the "Unconstitutional: Examining the Patriot Act" video.

Compare and contrast eurozone and the us in terms of oca : One could view the United States as a currency union of 50 states. Compare and contrast the Eurozone and the United States in terms of the optimum currency.

When the goal of care is to develop mutual plan of care : When the goal of care is to develop a mutual plan of care between the nurse and the community client,

How would you manage potential conflict arising : Does technology allow you to develop trust for team building? How would you manage potential conflict arising from the cultural differences among project team?

User Account

All Pages