EC202 1nd Edition Lecture 38Outline of Last Lecture I. Monetary policyII. Fiscal policyIII. Fed toolOutline of Current Lecture II. ReevaluationIII. DevaluationIV. Exchange rateV. International reservesVI. Speculative attacksCurrent Lecture-Revaluation-An increase in the official value of a currency in a fixed-exchange-rate system-Devaluation-A reduction in the official value of a currency in a fixed-exchange-rate system-Overvalued exchange rate-An exchange rate that has an officially fixed value greater than its fundamental value-Undervalued exchange rate-An exchange rate that has an officially fixed value less than its fundamental value-International reserves-Official reserve assets held by a government for the purpose of purchasing the domesticcurrency in the foreign exchange market-Speculative attacks-A massive selling of domestic currency assets by financial investorsThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.-Investors fear an overvalued currency will soon be devalued-Often turn out to be the cause of devaluation-Ends a government’s attempts to maintain an overvalued exchange
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