Economics HL

Chapters

117

Notes

Unit 1 - Intro To Econ & Core Concepts

Unit 2 - Microeconomics

Unit 3 - Macroeconomics

Unit 4 - The Global Economy

Economics HL

Unit 4 - The Global Economy

Managed Exchange Rates: A Deep Dive into Currency Systems

449 words

3 mins read

Last edited on 5th Nov 2024

Table of content

Managed exchange rates 🎮

Maintaining disequilibrium exchange Rates 🤹

Real-world examples 🌏

The comic battle of exchange rates 🥊

Quick summary 🚀

Test Yourself 📚

Managed exchange rates 🎮

Floating & Fixed Mix: Think of it as the middle-ground between letting a currency's value float like a boat on open water (fully influenced by supply and demand) and tying it down with fixed rates. Imagine a boat tied with a long leash; it can move but not too far!
Central Bank Intervention: When the currency's value drifts too far from what's considered good, the central bank steps in, buying or selling its currency to keep things in check.
Sterilized Intervention: Like cleaning up the mess! The central bank makes sure changes in money supply are neutralized. It's like buying the currency without decreasing the reserves that banks have.

Maintaining disequilibrium exchange Rates 🤹

Undervalued Currency: Like a discount sale!
- Why?: To make exports cheaper, more competitive. Just like China did to boost growth! 🇨🇳
- How?: By purchasing dollars and selling local currency, or keeping interest rates low.
- Risks?: Trade frictions (your success might hurt your friend's business) and inflation danger. Think of it like eating too much candy—sweet but risky!
Overvalued Currency: Like premium pricing!
- Why?: Mostly used in import-substitution strategy. Imagine a country is trying to create its own toy industry, so it buys machines at low costs and prevents imported toys from coming in.
- How?: By buying its currency and selling dollars or keeping interest rates high.
- Downside?: Like making your homemade cookies too expensive, it might hurt the export sector, and farmers may earn less.

Real-world examples 🌏

Undervalued Currency in Action: China kept its currency undervalued to boost exports. It's like having a sale at a store to attract more customers!
Overvalued Currency in Action: Some countries keep their currency overvalued to import machines cheaply and protect young industries. Imagine pampering a baby plant until it grows strong!

Unlock the Full Content!

Dive deeper and gain exclusive access to premium files of Economics HL. Subscribe now and get closer to that 45 🌟

Economics HL

Unit 4 - The Global Economy

Managed Exchange Rates: A Deep Dive into Currency Systems

449 words

3 mins read

Last edited on 5th Nov 2024

Table of content

Managed exchange rates 🎮

Maintaining disequilibrium exchange Rates 🤹

Real-world examples 🌏

The comic battle of exchange rates 🥊

Quick summary 🚀

Test Yourself 📚

Managed exchange rates 🎮

Floating & Fixed Mix: Think of it as the middle-ground between letting a currency's value float like a boat on open water (fully influenced by supply and demand) and tying it down with fixed rates. Imagine a boat tied with a long leash; it can move but not too far!
Central Bank Intervention: When the currency's value drifts too far from what's considered good, the central bank steps in, buying or selling its currency to keep things in check.
Sterilized Intervention: Like cleaning up the mess! The central bank makes sure changes in money supply are neutralized. It's like buying the currency without decreasing the reserves that banks have.

Maintaining disequilibrium exchange Rates 🤹

Undervalued Currency: Like a discount sale!
- Why?: To make exports cheaper, more competitive. Just like China did to boost growth! 🇨🇳
- How?: By purchasing dollars and selling local currency, or keeping interest rates low.
- Risks?: Trade frictions (your success might hurt your friend's business) and inflation danger. Think of it like eating too much candy—sweet but risky!
Overvalued Currency: Like premium pricing!
- Why?: Mostly used in import-substitution strategy. Imagine a country is trying to create its own toy industry, so it buys machines at low costs and prevents imported toys from coming in.
- How?: By buying its currency and selling dollars or keeping interest rates high.
- Downside?: Like making your homemade cookies too expensive, it might hurt the export sector, and farmers may earn less.

Real-world examples 🌏

Undervalued Currency in Action: China kept its currency undervalued to boost exports. It's like having a sale at a store to attract more customers!
Overvalued Currency in Action: Some countries keep their currency overvalued to import machines cheaply and protect young industries. Imagine pampering a baby plant until it grows strong!

Unlock the Full Content!

Dive deeper and gain exclusive access to premium files of Economics HL. Subscribe now and get closer to that 45 🌟