I need some help in this question, thanks.

Suppose that a Home country has many trading partners and each
trading partner has its own currency.
(a) If each trading partner allows its currency to float, is it possible for
Home to fix its exchange rate against all of its trading partners?
(b) If Home wishes to reduce the variability of its effective exchange rate, what kind of exchange rate regime might it choose?

  1. 👍 0
  2. 👎 0
  3. 👁 265
  1. a) could only work if the Home country was extremely large, relative to the sum of all the other countries. Otherwise you would have a knife-edge problem; either all the other countries would hold the Home contries currency or none of them would. For more info, google "Walrus Law"

    b) It could express its currency in terms of a precious commodity (e.g., gold). Google the Gold Standard

    1. 👍 0
    2. 👎 0

Respond to this Question

First Name

Your Response

Similar Questions

  1. Social Studies

    Which of the following is an example of specializing in the service sector? A. a country growing mainly coffee beans B. a country exporting minerals C. a country investing in education D. a country focusing on call centers++

  2. Social Studies

    1. For which of the following is the great pharaoh Ramses II known? Drag and drop the accomplishments to the box. Words may be used once or not at all. -built monuments added to -was female pharaoh -Ramses II accomplishments

  3. Statistics

    Suppose a baseball pitcher throws fastballs 80 % of the time and curveballs 20 % of the time. Suppose a batter hits a home run on 8 % of all fastball pitches, and on 5 % of all curveball pitches. What is the probability that this

  4. Social Studies

    Which of the following is an advantage to having a common currency in the European Union? A. It allows each government to make its own policy regarding currency. B. It allows the worth of the currency to change depending on the

  1. Geography

    What is naturalization? A. the process by which a person becomes a legal citizen of a country B. the process by which a person is forced to leave a country and not return C. the process by which a person gains permission to attend

  2. Math

    Suppose the Bainters purchase the $150,000.00 home with a 20% down payment, a 30-year mortgage, and an interest rate of 4.2%. Annual property taxes are $1920.00. Home insurance is $750.00 per year, which is to be placed into an

  3. statistics

    Burning fuels in power plants or motor vehicles emit carbon dioxide, which contributes to global warming. Table 1.3 displays CO2 emissions per person from countries with populations of at least 20 mil. Why do you think we choose

  4. international trade

    2. Consider two countries, Home and Foreign. Assume that Home is labor-abundant while Foreign is land-abundant. Also suppose that there are two industries, wine and cheese, with wine being the more labor-intensive industry. a)

  1. Math

    I need help solving this. I do not get it one bit. The median home sale price in country A has been rising approximately linearly since 1995. The median home sale price in 1995 was ‚Äč$110,500. The median home sale price in 2004

  2. Algebra

    You and your friend live 12 miles apart. You leave home at the same time and travel toward each other. You walk at a rate of 4 mph and your friend bicycles at a rate of 11 mph. A) How long after you leave home will you meet? How

  3. Statistics

    The home states of a certain group of people are distributed as follows: 53 percent are from MISSOURI, 21 percent are from KANSAS, and 26 percent are from IOWA. (No one in the group had a home state other than one of these three.)

  4. English writing

    Q you have recently returned to live in your home country after being up abroad for the last three years. You find that many things have changed. Now that you are home, writes a letter to a friend. In your letter you should: This

You can view more similar questions or ask a new question.