POS160 Week 5 Notes (part 2)
POS160 Week 5 Notes (part 2) POS160
Popular in Global Politics
verified elite notetaker
Popular in Political Science
This 2 page Class Notes was uploaded by Alexandra Notetaker on Tuesday September 13, 2016. The Class Notes belongs to POS160 at Arizona State University taught by Dr. Reed M. Wood in Fall 2016. Since its upload, it has received 5 views. For similar materials see Global Politics in Political Science at Arizona State University.
Reviews for POS160 Week 5 Notes (part 2)
Report this Material
What is Karma?
Karma is the currency of StudySoup.
Date Created: 09/13/16
POS160 MONETARY RELATIONS Monetarypolicy: Governmentpoliciesinfluencing macroeconomicconditions: Unemployment Inflation Economicgrowth Involvesmanipulation ofinterestsandexchangerates ExchangeRates: The price ofaNationalcurrencyrelative toother nationalcurrencies Appreciation:when thedollargoesup in value Depreciation:ifitgoesdown invalue Effectsofexchangerate fluctuations Appreciation:costofexportedgoodincreasesandleadstolowerforeign demandfor goods Depreciation:costofgoodsdecline andleadstomoreexportedgoods Influencesimportersandexportersdifferently CurrencyValues Determinedbythesupply/demandofacurrency Moredemand=higher value Lessdemand=lower value Exchangesystemeffectsvalue Chooseanother currency(Ecuador usesUS $) “Fix/Peg”currencyvalue toanother currencyor preciousmetal(gold/silver) Allow currencytofloatin open market Interestratesinfluence exchange rates Higherinterestrates=moreprofitable for people toputtheir moneyin acountry i.e.Investorsneedacurrencyin order toinvestin acountry greaterdemandfor currency higher currencyvalue Higher interestrates=greatercurrencyvalue Currencyappreciation leadstomoreexpensive exportsandlessexpensive imports Lessdemandfor US goods Foreign goodsarecheaper Lower inflation& higher standardofliving GoldStandard(1860-1930) Mostmajoreconomieswereon aclassicalgoldstandard Benefitsofusing gold: Economicprice stability Long-termgrowth (rarelydevalues) Preventsinflation Costsofusing gold: Reducesflexibilityin monetarypolicy Hardertoprintmoney Lesscontrolofinflation andunemployment Short-termprice volatility Bretton WoodsMonetarySystem(1945-1973) Fixedbutadjustable rates Governmentsfoxedcurrencyvaluesfor long periodsoftime butpermittedsomechanges Post1973 Floatingexchangeratesdominate Majorcurrenciesfloat Otherstates“Peg”nationalcurrencytocurrencyofanother state (China,Pakistan pegged toUS dollar) Fixedor Float–Government decides Fixedexchange rate:provide stabilityandfacilitate internationaltrade andinvestment Reducescontrolofmonetarypolicy Cannotadjustfixedrates Floating exchangerate:offermorefreedom Governmentcan changethe exchangerate Manipulatevalue viainterestrates Can maketrade andinvestmentmore difficult Currencyvalue becomesvolatile Investorsmaybe scaredaway Capitalflightduring economiccrisis