1102 Lecture Notes Gina Pieters Topic 16 Exchange Rates and Policy Exchange Rate Systems Not in book Two kinds of exchange rate systems Flexible Exchange Rates Disadvantages 1 2 3 Fixed Exchange Rates system Fixed Exchange Rate controls 1 2 3 4 Disadvantages of fixed exchange rates 1 2 3 Managed Exchange Rate Float Support of 1 Page 1102 Lecture Notes Concerns Exchange Rates And Policy Equilibrium in the foreign exchange rate market 2 Page Gina Pieters 1102 Lecture Notes 1 Suppose there is expansionary monetary policy 2 Suppose there is a government budget deficit 3 Page Gina Pieters 1102 Lecture Notes Gina Pieters 3 Suppose the government enacts a trade barrier like a tariff in an attempt to reduce to the trade deficit 4 Capital Flight A large and sudden reduction in the demand for assets located in a country 4 Page
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