Financial Markets and Institutions (2-downloads)

12. How can persistent U.S. balance-of-payments deficits

stimulate world inflation?

13. Why did the exchange rate peg lead to difficulties

for the countries in the ERM when German reuni-

fication occurred?

14. Why is it that in a pure flexible exchange rate system,

the foreign exchange market has no direct effects on

the monetary base and the money supply? Does this

mean that the foreign exchange market has no effect

on monetary policy?

15. “The abandonment of fixed exchange rates after 1973

has meant that countries have pursued more inde-

pendent monetary policies.” Is this statement true,

false, or uncertain? Explain your answer.