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Explain how the money markets of two countries are linked through the foreign exchange market.
Answer: The financial policy actions by the Fed affect the U.S. interest rate altering the dollar/euro exchange rate that clears the foreign exchange market. The European System of Central Banks (ESCB) is able to affect the exchange rate by changing the European money supply and interest rate.
Q. Who are the major participants in the foreign exchange market? Answer: 1. Commercial banks 2. Corporations 3. Nonblank financial institutions 4. Central banks
Q. Why do governments prefer to avoid excessive current account surpluses? Or, why are growing domestic claims to foreign wealth ever a problem? Answer: On behalf of a given l
Q. Illustrate why Argentina, one of the world's richest countries at the begning of the twentieth century, has become progressively poorer relative to the industrial countries. [
Q. Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. Answer: Expected p
Development through stabilisation and reform can be understood as follows The reasoning here was that the trade and resource transfer could not, by themselves, lift L
Q. Why did the Fed step in to organize a rescue for Long Term Capital Management (LTCM) in September 1998, rather than simply letting the trouble fund fail? Was the Fed's action
Q. What is the national income identity for an open economy? Answer: Y = C + I + G + EX - IM.
Question : (a) Differentiate between Transaction, economic risk and Translation risk in foreign exchange market. (use an illustrative and numerical example in each case. (b)
Q. Albania refused to engage in international trade for ideological reasons. To maximize its economic welfare it could choose to produce at which point in the diagram above? Sup
Given the following hypothetical data (in millions of naira): 1. gross private domestic investment N59 2. contributors for social insurance N8 3. inter
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