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Q. Present the case against floating exchange rates.
Answer:
1.The discipline obligatory on individual countries by a fixed rate would be lost.
2. Undermine speculation and money market disturbances.
3. Damages to investment and international trade.
4. A Clumsy economic policies.
5. The misapprehension of greater autonomy.
Q. If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant, can it still keep the exchange rate fixed at E 0 ? An
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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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