Question: One proposal to stabilize the international monetary system involves setting
One proposal to stabilize the international monetary system involves setting exchange rates at their purchasing power parity rates. Once exchange rates were correctly aligned (according to PPP) each nation would adjust its monetary policy so as to maintain them. What problems might arise from using the PPP rate as a guide to the equilibrium exchange rate?
Answer to relevant QuestionsComment on the following statement. ''It makes sense to borrow during times of high inflation because you can repay the loan in cheaper dollars.''In late December 1990, one-year German Treasury bills yielded 9.1%, whereas one-year U.S. Treasury bills yielded 6.9%. At the same time, the inflation rate during 1990 was 6.3% in the United States, double the German rate of ...Suppose that in Japan the interest rate is 8% and inflation is expected to be 3%. Meanwhile, the expected inflation rate in France is 12%, and the English interest rate is 14%. To the nearest whole number, what is the best ...Suppose that on January 1, the cost of borrowing French francs for the year is 18%. During the year, U.S. inflation is 5%, and French inflation is 9%. At the same time, the exchange rate changes from FF 1 = $0.15 on January ...According to the World Competitiveness Report 1994, with freer markets, Third World nations now are able to attract capital and technology from the advanced nations. As a result, they can achieve productivity close to ...
Post your question