IDs and Paired-Concept Questions

Question

Examlex · Accepted Answer

The Answer is Stabilization Program:
A stabilization program refers to a set of measures implemented by a government to restore balance to its economy. These measures are often taken in response to a period of economic crisis, which may include high inflation, a large budget deficit, a significant balance-of-payments deficit, or a combination of these issues. The program typically involves policy changes such as fiscal austerity (reducing government spending and/or increasing taxes), monetary tightening (raising interest rates to control inflation), exchange rate adjustments, and structural reforms aimed at improving the efficiency and competitiveness of the economy. The significance of a stabilization program lies in its potential to restore economic stability, reduce inflation, and lay the groundwork for sustainable economic growth.

Crawling-Peg Exchange Rate Regime:
A crawling-peg exchange rate regime is a type of exchange rate policy that falls between a fixed exchange rate and a floating exchange rate system. In a crawling-peg system, a country's currency is adjusted periodically at a fixed, pre-announced rate or in response to certain quantitative indicators. The adjustments are usually made in small increments to avoid large swings in the exchange rate and to provide a more stable environment for international trade and investment. The significance of this regime is that it allows a country to have some control over its currency's value while still enabling gradual adjustments to reflect underlying economic conditions.

Relationship between Stabilization Program and Crawling-Peg Exchange Rate Regime:
The relationship between a stabilization program and a crawling-peg exchange rate regime is that they can be components of a broader economic strategy to address macroeconomic imbalances. A country facing a balance-of-payments crisis might adopt a stabilization program that includes the implementation of a crawling-peg exchange rate regime. By doing so, the country can aim to control inflation and restore competitiveness without the economic shock that a sudden devaluation might cause. The crawling-peg regime provides a predictable and controlled path for exchange rate adjustments, which can help to stabilize the economy and restore investor confidence. This, in turn, can support the goals of the stabilization program by making the country's exports more competitive and improving the balance of payments.

IDs and Paired-Concept Questions

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