How can we determine fixed exchange rate, Macroeconomics

Assignment Help:

How can we determine fixed exchange rate

If a nation has a fixed exchange rate (say against a specific currency), the government or central bank may change this fixed exchange rate. Assume that Hong Kong is our home country and that Hong Kong dollar (HKD) is fixed against USD at the exchange rate 7.8 HKD/USD (direct notation). If central bank in Hong Kong changes this exchange rate to say 8.2 HKD/USD it makes foreign currency more costly and HKD cheaper. In this case we say that HKD has been devalued. Though, if exchange rate is changed to say 8.6 HKD/USD we say that HKD has been revalued.

1988_The euro against the US dollar.png

As an example, Figure above illustrates the exchange rate between USD and euro with the euro as the base currency.

 

 


Related Discussions:- How can we determine fixed exchange rate

Explain about the circular-flow of economic activities, Explain about the c...

Explain about the circular-flow of economic activities. Circular-Flow of Economic Activities: Economic Agents:    a. Households b. Firms Where they interact:

Why gdp is determined only by aggregate demand, Q. Why GDP is determined on...

Q. Why GDP is determined only by aggregate demand? Note that we haven't said anything about the aggregate supply so far. In order to justify why GDP is determined only by aggre

Define the term - productivity, Define the term - Productivity Producti...

Define the term - Productivity Productivity is the concept which measures how outputs can be maximised from given inputs. In factories labour productivity is normally calculate

Employment, the production of 200 units of consumer goods and 300 units of ...

the production of 200 units of consumer goods and 300 units of capital goods : a) indicates full employment b) may be a result of unemployment c) may be impossible for now d)

Two countries had the same levelof real gdp per capita, If Country A had fo...

If Country A had four times the initial level of real GDP per capita of Country B and it was growing at 1.4 percent a year, while real GDP was growing at 2.3 percent in Country B,

Control of ochratoxin, Q. Control of ochratoxin? Control: Once ochratox...

Q. Control of ochratoxin? Control: Once ochratoxin A has been formed in a food, it is difficult to remove by most forms of food processing. Cooking with or without previous soa

Perfect competition, c) Explain why perfectly competitive markets lead to a...

c) Explain why perfectly competitive markets lead to an allocatively efficient allocation of resources in the long run

What are the steps in hypothesis testing, An experiment is explained by an ...

An experiment is explained by an exponential random variable with mean ? and x1 and x2. A proposed test of the hypothesis ?=2 next to the alternative ?=½ uses the critical region {

Cost benefit analysis-vat, (1) Based on the article, describe as best you c...

(1) Based on the article, describe as best you can: (i) the reference group for the cost benefit analysis, (ii) the purpose of the study (i.e., what is the "project" in this

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd