--%>
Assignment Help - homework help

Government Pegged Currencies

Question:

If a government pegs the value of its currency to another currency, the government must stand ready to i. _________________________ the "hard" currency to defend the pegged value of its own currency. ii. Briefly Explain?

Answer:

Suppose the value of one of the pegged currencies falls. In that case, the businesses in that country will see an unprecedented increase in their costs and hence, might incur heavy losses. This might affect the sector and the economy as a whole adversely. In that case, the government and the central bank of that country must be ready to provide the currency against which its own currency is pegged so that the depreciation is controlled.

 

 

   Related Questions in Business Economics

  • Q : Elucidate Ticket Scalping - A Bum Rap

    Elucidate “Ticket Scalping:  A Bum Rap”?

    		•
  • Q : Describe the types of multiplant firms

    Describe the types of multiplant firms?

    		•
  • Q : Case of arbitrage while selling and

    Assume that melons sell for $5 in Brazil when moose pelts sell for $10, still into Canada melons sell for $10 as well as moose pelts sell for $5. A person who buys moose pelts within Canada to sell into Brazil would be doing: (1) speculation. (2) the “invisible

    		•
  • Q : What do you mean by inflation What do

    What do you mean by inflation

    		•
  • Q : Prices are the automatic regulator

    “Prices are the automatic regulator that tends to keep production and consumption in line with each other.”  Explain.

    		•
  • Q : Speculation and intermediary operations

    Transaction costs tend to be decreased, prices to consumers are classically stabilized and lowered, and economy-wide efficiency is generally improved through: (1) rigid wage and price controls. (2) central planning that fosters monopo

    		•
  • Q : Forcast 9. The following table shows

    9. The following table shows annual sales data for Stuff Happens, Inc., over the ten-year 1998-2008 period: Year Sales ($ Millions) 1998 $2.0 1999 2.2 2000 2.4 2001 2.6 2002 2.8 2003 3.0 2004 3.2 2005 3.5 2006 3.8 2007 4.1 2008 4.3 A. Calculate the 1998-2008 growth rate in sales using

    		•
  • Q : Divergences arise between equilibrium

    What divergences arise between equilibrium and an efficient output when spillover costs? How might government correct this divergence?

    		•
  • Q : Consumer purchase decision If the price

    If the price of a good is given, how does a consumer choose/decide as to how much of that good to purchase?

    		•
  • Q : Principle of comparative advantage When

    When Gene can make three pairs of cowboy boots per week or one saddle whereas Roy can make either two pairs of boots or two saddles, Gene will form boots whereas Roy makes saddles according to the: (i) Law of Occam’s Razor. (ii) Principle of comparative advantag

    		•