Do you think the U.S. dollar is more likely to strengthen or weaken over the next few months? Explain your reasoning.
Answer to relevant QuestionsChina’s stock of foreign-exchange reserves has risen more than 20 times since 2000, and approached $3.5 trillion in the spring of 2013. Do you think that pace of reserve accumulation is likely to continue? Why or why not?Why might sterilized foreign-exchange market intervention have a greater impact on the exchange rate in times of financial stress than in times of normal market conditions?China is the world’s largest exporter and has a fixed nominal exchange to the U.S. dollar. However, China’s real exchange rate, which determines the country’s competitiveness, can change even when the nominal rate is ...Using the same graph as that described in Problem, show how the central bank could use its control over the quantity of money to target a particular interest rate in the face of changes in velocity. Consider a country where the level of excess reserves fluctuates widely and unpredictably. Would such a country be a good candidate for a money growth rule to guide monetary policy? Explain your answer.
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