Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

9. Under flexible (floating) exchange rates, trade balances should even out through the mechanism of currency appreciation or depreciation. That is, if country A runs

image text in transcribed
image text in transcribed
9. Under flexible (floating) exchange rates, trade balances should even out through the mechanism of currency appreciation or depreciation. That is, if country A runs a trade deficit for long enough with country B, eventually country A's currency will depreciate resulting in its goods being cheaper relative to country B and the trade "surplus will result. Describe in as much detail as possible how trade flows are balanced if the exchange rate is fixed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Environmental Economics

Authors: Barry Field, Martha K Field

5th Edition

0073375764, 9780073375762

More Books

Students also viewed these Economics questions