Answer to Question #49353 in Macroeconomics for shana

Question #49353
If lower exchange rate spurs exports then why wouldn’t it be a good idea of policy
makers to intervene to push the exchange rate as low as they can. Discuss
1
Expert's answer
2014-11-25T10:15:31-0500
Lower exchange rate really spurs exports and the total business activity in the economy. But it wouldn’t be a good idea of policy makers to intervene to push the exchange rate as low as they can, because very low rates and fast increase of business activity will cause the increase of inflation level, which is not good for the economy and may create the inflationary gap. That's why exchange rate should not be as low, as possible.

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Comments

Assignment Expert
25.11.14, 19:49

Dear shana, You're welcome. We are glad to be helpful. If you liked our service please press like-button beside answer field. Thank you!

shana
25.11.14, 17:51

thanks for the assistance it was really helpful

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