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Arguments for and against the alternative exchange rate regimes

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1. There are arguments for and against the alternative exchange rate regimes
a. List the advantages of the flexible exchange rate regime.
b. Criticize the flexible exchange rate regime from the viewpoint of the proponents of the fixed exchange rate regime.
c. Rebut the above criticism from the viewpoint of the proponents of the flexible exchange rate regime.

2. Assess the possibility for the euro to become another global currency rivaling the U>S> dollar and the world economy?

3 Explain how each of the following transaction will be classified and recorded in the debit and credit of the U.S. balance of payments.
a.A Japanese insurance company purchases U.S. Treasury bonds and pays out of her bank account kept in New York City.
b. A U.S. citizen consumes a meal at a restaurant in Paris and pays with her American Express card.
c. An Indian immigrant living in Los Angeles sends a check drawn on his LA bank account as a gift to his parents living in Mumbai.
d. A U.S. computer programmer is hired by a British company for consulting and gets paid from the U.S. bank account maintained by the British company

4. Discuss the possible strengths and weaknesses of SDR's versus the dollar as the main reserve currency. Do you think the SDR should or could replace the U.S. dollar as the main global reserve currency?

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The arguments for and against the alternative exchange rate regimes are determines. The expert lists the advantages of the flexible exchange rate regimes.

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http://www.preservearticles.com/201012291898/advantages-disadvantages-flexible-exchange-rates.html

1. There are arguments for and against the alternative exchange rate regimes
a. List the advantages of the flexible exchange rate regime.

Some advantages associated with flexible exchange rates include the ability to establish an Independent Monetary Policy, the ability for the flexible exchange rate to serve as a Shock Absorber, the argument that using flexible exchange rates actually Promotes Economic Development, and the belief that this form of exchange rate promotes international trade. In addition, proponents also argue that a flexible exchange rate can offer Solutions to Balance of Payment Problems while automatically clearing off the market through changes in exchange rates, which negates the possibility of scarcity or surplus of any currency.

b. Criticize the flexible exchange rate regime from the viewpoint of the proponents of the fixed exchange rate regime.

Proponents of the fixed exchange rate would argue that flexible exchange rates lead to fluctuations in the Currency exchange rate, which is negative for trade as firms are less reluctant to invest in ...

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