Compare currency board to conventional fixed exchange rate
What will be an ideal response?
Currency board may not acquire domestic assets and thus cannot lend currency freely to domestic banks in time of financial crisis. Also, limit government ability to "surprise" the market and have real devaluation.
You might also like to view...
Shama is producing candles in a perfectly competitive market. When she produces 500 candles, her total cost is $250. If she produces one additional candle, her total cost increases to $260
In order to maximize her profit, she should produce the additional candle A) if the market price for a candle is $12. B) only if the market price exceeds $260 for a candle. C) only if the market price exceeds $250 for a candle. D) if the market price for a candle exceeds $0.50. E) if her price exceeds her average total cost.
If the nominal rate of interest is 2 percent, and the expected inflation rate is -10 percent, the real rate of interest is
A) 2 percent. B) 8 percent. C) 10 percent. D) 12 percent.