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Q. Explain why the dollar of the United States became the postwar world's key currency.
Answer:
1. The untimely convertibility of the U.S dollar in 1945.
2. The special position of the dollar in the Bretton Woods system.
3. The potency of the American economy relative to the devastated economies of Europe and Japan.
4. Central banks logically found it advantageous to hold their international reserves in the form of interest-bearing dollar assets.
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Q. Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run
Can you brief this concept for me?
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Is a depreciation of the dollar/euro exchange rate correlated with a decrease in the dollar return on U.S. deposits? Answer: No, suppose that the Interest Parity is maintained
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