Three exchange rate regimes
Floating exchange rates
Fixed exchange rates
How the central bank maintains a fixed rate
Overvalued fixed rate: surplus of domestic currency at the fixed price
Maintaining a fixed rate requires reserves
Devaluation and revaluation
Trade-offs of fixed vs. floating
The impossible trinity (trilemma)
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Managed float
AP Exam Tips
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Common Mistakes
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Unit 6 topics
Unit 6 overview6.1Balance of Payments Accounts6.10Economic Integration and Trade Agreements6.2Exchange Rates6.3The Foreign Exchange Market6.4Effect of Changes in Policies and Economic Conditions on the Foreign Exchange Market6.5Changes in the Foreign Exchange Market and Net Exports6.6Real Interest Rates and International Capital Flows6.7The Effect of Trade Policies6.8Fiscal and Monetary Policies in Open Economies6.9Exchange Rate Regimes