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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.
Q. What are the main lessons economists learned from the developing country crisis? Answer: 1. select the right exchange rate regime. 2. The central significance of
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Q. How can long-run values in the real exchange rate change? Answer: A elevate in world relative demand for U.S output origins a long-run real appreciation of the dollar
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