Chapter 2, Short Answers 1. Most Western nations were on the gold standard for currency exchange rates from 1876 until 1914. Today we have several different exchange rate regimes in use, but most larger economy nations have freely floating exchange rates today and are not obligated to convert their currency into a predetermined amount of gold on demand. Currently several parties still call for the "good old days" and a return to the gold standard. Develop an argument as to why a return to the gold standard might be a good idea. 2. The mobility of international capital flows is causing emerging market nations to choose between a free-floating currency exchange regime and a currency board (or taken to the limit, dollarization). Describe how a floating versus a fixed regime would work and identify at least one likely economic result for each regime. 3. List and explain the three attributes (often referred as the "impossible trinity) an ideal currency would possess if existed in today's world. 4. Explain the benefits that the euro would generate for the states participating in the European Economic and Monetary Union. 5. Dollarization is the use of the U.S. dollar as the official currency of the country. Briefly explain the arguments for and against dollarization. Provide a couple example(s) of countries that used the dollar as their official currency. Chapter 2, Short Answers 1. Most Western nations were on the gold standard for currency exchange rates from 1876 until 1914. Today we have several different exchange rate regimes in use, but most larger economy nations have freely floating exchange rates today and are not obligated to convert their currency into a predetermined amount of gold on demand. Currently several parties still call for the "good old days" and a return to the gold standard. Develop an argument as to why a return to the gold standard might be a good idea. 2. The mobility of international capital flows is causing emerging market nations to choose between a free-floating currency exchange regime and a currency board (or taken to the limit, dollarization). Describe how a floating versus a fixed regime would work and identify at least one likely economic result for each regime. 3. List and explain the three attributes (often referred as the "impossible trinity) an ideal currency would possess if existed in today's world. 4. Explain the benefits that the euro would generate for the states participating in the European Economic and Monetary Union. 5. Dollarization is the use of the U.S. dollar as the official currency of the country. Briefly explain the arguments for and against dollarization. Provide a couple example(s) of countries that used the dollar as their official currency
