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Unformatted text preview: it's the price of a currency in terms of another. If the demand for a currency goes up or its supply falls, its price will increase. This means that it will take more units of another currency to purchase it. 4. Can a fall in the value of the dollar ever be good for the United States? A fall in the value of a currency is called a depreciation of the currency. When the currency of a country depreciates, it makes goods produced abroad more expensive and it makes domestically produced goods less expensive in foreign markets. As a result, imports go down and exports go up. The increase in net exports tends to increase GDP. 5. Does the presence of the foreign sector help or hinder stabilization policies? The presence of the foreign sector and flexible exchange rates has opposite results on the effectiveness of monetary policy compared to fiscal policy. These factors tend to increase the effectiveness of monetary policy, but decrease the effectiveness of fiscal policy....
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This note was uploaded on 09/14/2009 for the course ECON 304L taught by Professor Staff during the Fall '07 term at University of Texas at Austin.
- Fall '07