Any Economic Buffs?? Need help

[oubeta]

Have a midterm in the morning and have a few questions that I'm not sure on..

Here's the one I'm having problems with

1. Suppose a country fixes its exchange rate but then runs a higher rate of inflation that the anchor country. Show and explain what will happen to its real echange rate and its balance of payments. Suppose a country fixes its exchange rate, and then the anchor country raises is intrest rate. What are the options facing the pegging country?


2. "With a fixed exchange rate a country's monetary policy cannot be used indpendently for domestic problems"

True, False, uncertain,,,defend you answer..

 

[DcupSheepNipples]

Any Economic Buffs?? Need help

Have a midterm in the morning and have a few questions that I'm not sure on..

Sometimes it helps to post the questions so you can get some help!

 

[oubeta]

edited

 

[DcupSheepNipples]

1. Wouldnt they pretty much secure the inflation of the the anchor? But obviously then the question you presented would be void! I can see the benefits but I'm not sure about the trade offs if the inflation is not secure with the anchor? I would think they could find another anchor! Split from the anchor and have their own currency? Or unlock it's fix on inflation with is original anchor? I don't know! I'm out of the loop on this Question? Hopefully some one else can help you!

2. How could they deal with inflation if their exchange rate is fixed? Sorry more questions than answers!

 

[oubeta]

Ya I come up with more questions than answers also. I wonder if the pegging country could manage exports and limit imports,,,

really I have no clue

 

[oubeta]

one more. I'm not looking for a easy way out, but I can't find them anywhere in my text.

What does the term "fungibility" mean? How does is relate to World Bank project lending?



- the only thing I can think of is that the World Bank loans out money to developing countries if they feel that it will benefit their economy such as for roads of farming. But inturn they used the money for thinks such as tanks, armies etc. kinda like the "food for Oil" in Iraq.

sound about right??/

 

[DcupSheepNipples]

Trade is always a factor! Sounds good to me! But how it correlates to the answer I don't know?

Your giving me bad cramming frashbacks from back in the day! This is usually when I would pass out and wake up 5:00 in the morning and try again!

 

[oubeta]

Took 2 Ritalins a hour ago so I'm up for a while. Might have to take a few valiums to get to bed and wake up in the moring and try to figure this shit out. Shit I need to graduate....

 

[DcupSheepNipples]

fungibility (noun) - 1. the quality of being capable of exchange or interchange

To address the fungibility of foreign aid funds, a proposed new lending instrument—a public expenditure reform loan—would tie an institution's lending strategy to the recipient country's achieving mutually agreed-upon development goals!

A foreign aid or foreign lending policy that focuses exclusively on project financing may have unintended consequences. New research shows that aid intended for crucial social and economic sectors often merely substitutes for spending that recipient governments would have undertaken anyway and the funds that are thereby freed up are spent for other purposes.

Just like Russia when the World Bank gave them Billions of dollars to stabilize the Gov and instead it went to individuals who were the new Capitalists in the recently post USSR Russia! The money was not used for the purpose it was intended to!

Yes!

 

[oubeta]

Sweet so I guess I have the right concept huh??

K for you!

 

[oubeta]

If I understand the "food for oil" plan we give Iraq food in exchange for their oil. So inturn the money they would have spent on food goes to WMD,, that's fucked up..

 

[DcupSheepNipples]

If I understand the "food for oil" plan we give Iraq food in exchange for their oil. So inturn the money they would have spent on food goes to WMD,, that's fucked up..

'

Yes it was fucked up for the world and the people of Iraq! Billions of the food for oil money went to Saddam and his WMD rather than the people! But that's Saddam for you! And those that let it happen!

 

[oubeta]

THink I got most of them figured out.

One last one

In what ways is loaning money to a goverment different that loaning money to a company?

Can't really think of many differences,

 

[DcupSheepNipples]

In what ways is loaning money to a goverment different that loaning money to a company?

Tresuary Bill, Gov bonds you are loaning money to the Goverment and they are backed by the U.S. government! But I'm not sure what your question is asking! Who is loaning the money? A individual, Company or which goverment, any government?

 

[oubeta]

the US goverment lending the money I think.
Good ideas though

 

[oubeta]

Valiums kicked in Check back in the morning
thanks dcup