- Describe a fixed exchange rate system involving commitment to a single fixed rate.
- Distinguish between a devaluation of a currency and a revaluation of a currency.
- Explain, using a diagram, how a fixed exchange rate is maintained.
- Explain how a managed exchange rate operates, with reference to the fact that there is a periodic government intervention to influence the value of an exchange rate.
- Examine the possible consequences of overvalued and undervalued currencies.
- Compare and contrast a fixed exchange rate system with a floating exchange rate system, with reference to factors including the degree of certainty for stakeholders, ease of adjustment, the role of international reserves in the form of foreign currencies and flexibility offered to policy makers
Continue on with the booklet you were given to address the objectives for fixed and managed exchange rates. You will be given another handout which you will use to evaluate the exchange rate systems (plus see textbook p290-292)