Which of the following statement is incorrect?O Currency crisis is more likely happen under the fixed exchange rate system.O Capital flight is more likely occur under the fixed exchange rate system.Fixed exchange rate regime relied on the ability of central banks to intervene in the currency market.O China is taking free floating exchange rate system.

Fixed exchange rate and free-floating exchange rate system are two ways in which a country can set…

Which of the following statement is incorrect? O Currency crisis is more likely happen under the fixed exchange rate system. O Capital flight is more likely occur under the fixed exchange rate system. O Fixed exchange rate regime relied on the ability of central banks to intervene in the currency market. China is taking free floating exchange rate system.

Which of the following statement is incorrect? O Currency crisis is more likely happen under the fixed exchange rate system. O Capital flight is more likely occur under the fixed exchange rate system. O Fixed exchange rate regime relied on the ability of central banks to intervene in the currency market. China is taking free floating exchange rate system.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter6: Government Influence On Exchange Rates

Section: Chapter Questions

Problem 4BIC

See similar textbooks

Similar questions

Which of the following is not an argument for central bank intervention? Exchange rates are highly volatile. Exchange rate fluctuations have an adverse effect on the macroeconomy. The market knows better than economic policy makers what the appropriate level of the exchange rate is. Central bank intervention can smooth out fluctuations in exchange rates.
Explain the managed floating exchange rate regime. How can the monetary authorities prevent effects of these exchange rate regime on money supply level and why the most of the emerging countries prefer to use this policy?
1. Choosing an exchange rate system One of the oldest debates in economics is whether a currency should have a fixed or floating exchange rate. There is no single solution that fits all economies. The choice of an exchange rate system depends on many factors, including the openness to international trade, maturity of the financial system, inflation, labor market flexibility, and credibility of policy makers. Consider two countries, Opland and Lovenia. Opland has a central bank with a weak reputation. Lovenia has a strong central bank but much higher inflation than its trading partners. Indicate the exchange rate system that would be more beneficial for each country in the following table. Country Pegged (Fixed) Exchange Rates Flexible Exchange Rates Opland Lovenia
Assume the United Kingdom (home) and the United States (foreign) have a fixed exchange rate regime. (i) A supply shock in the Foreign Exchange Market leads to an appreciation of the $/£ exchange rate. Explain how the Bank of England will intervene to defend the fixed exchange rate. Use graphs to support your answer. Label all axes. (ii) Discuss the effects on the domestic economy of this intervention. Which additional measures could the Bank of England take to offset these effects
If a country’s par exchange rate is overvalued, what kind of intervention would that country’s central bank be forced to undertake, and what kind of effect would it have on its international reserves? What must happen if this country’s central bank decides not to intervene anymore?
once the capital markets are integrated it is difficult for a country to maintain a fixed exchange rate, explain why this may be so
Which of the following factors will NOT increase the value of a currency in foreign markets? A. High inflation in that country B. High interest rates in that country C. A positive balance of payments with that country D. A strong stock market rally in that country
For the statements below indicate if it is true or false. If the statement is false, rewrite so that it is a true statement. Use the space available to answer your question. 1. Foreign exchange markets are markets in which people of one country exchange goods with people from another country. TRUE/False: 2. When the actual foreign exchange rate for the dollar is greater than the equilibrium rate, the dollar is undervalued, meaning that it will buy less in international trade than it will buy at home. TRUE/False : 3. For any given interest rate, the shorter the time period before the receipt a dollar, the lower is its present value. TRUE/False :
Description A system in which exchange rates are held constant A system in which exchange rates are determined by market forces, rather than government intervention A system in which exchange rates are allowed to fluctuate, but are subject to government intervention A system in which the home currency is synchronized with the value of a particular foreign currency One advantage of a Fixed Exchange Rate Systems Managed Float Freely Floating O Pegged O exchange rate system is that the country with such a system is less affected by inflation in other countries.
urgent no cahtgpt answer. What is the principal function of the foreign exchange market? A. To transfer purchasing power from one nation to another in exchange for currency B. To maintain fixed exchange rates that remain unaffected by market forces C. To facilitate foreign direct investment D. None of the above
Leads are deliberate early payments of amounts due to be paid in foreign currency to overseassuppliers, or other foreign currency payments. Leads can avoid the risk that the sterling cost of these payments may rise if the amountsof the payments are quoted in foreign currency and the foreign currencyincreases in value. Under what circumstances can how an international company can use ‘leads and lags’ to protect itself againstforeign exchange risk?
Leads are deliberate early payments of amounts due to be paid in foreign currency to overseas suppliers, or other foreign currency payments. Leads can avoid the risk that the sterling cost of these payments may rise if the amounts of the payments are quoted in foreign currency and the foreign currency increases in value Under what circumstances can how an international company can use ‘leads and lags’ to protect itself against foreign exchange risk.