(A)What Happens to the Fundamental Value of a Country's Exchange

question 106

Essay

(a)What happens to the fundamental value of a country's exchange rate when it raises its money supply in a fixed exchange-rate system? Does this make the currency overvalued or undervalued if originally the official rate equaled the fundamental value?
(b)What happens to the fundamental value of a country's exchange rate when the foreign country raises its money supply? Does this make the currency overvalued or undervalued if originally the official rate equaled the fundamental value?
(c)So,if a country wants to maintain its official rate equal to its fundamental value,what must it do when the foreign country raises its money supply? What happens to inflation?

---

Definitions:

Manufacturers

Entities or individuals involved in the transformation of raw materials or components into finished goods, often utilizing machinery, labor, and efficient production processes.

Americans with Disabilities Act

A civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life.

Industrial Regulation

A set of government rules and guidelines aimed at controlling the activities, standards, and behaviors within specific industries to protect public interests.

Celler-Kefauver Act

A U.S. law passed in 1950 to amend the Clayton Act, aimed at preventing anticompetitive mergers and acquisitions by closing loopholes regarding asset purchases.