Impact of exchange rate on the economy

Impact of exchange rate on the economy A countrys exchange rate is explicitly the currency value at which it transacts business with other countries around the world. It determines how much would be an equivalent of its currency which would be used to purchase goods and services from other countries around the global world. The world is a global market that needs a form of agreement in terms of currency at which it trades. The essence of a fixed exchange rate system is to maintain a countrys currency value  within a very narrow band.  This is also regarded as pegged exchange rate. The exchange rate in question depends on the form or type which the government of the country chooses to adopt or to use. OBJECTIVE To discuss issues as they will affect certainty in international trade when all countries adopt a fixed exchange rate. The issues to consider include: Types of exchange rate How exchange rate changes Impact of exchange rate on the economy both nationally and internationally Understanding of fixed exchange rate from demand and supply perspective. IMPACT OF THE ADOPTION OF A FIXED EXCHANGE RATE ON INTERNATIONAL MARKET. In the history of financial world there exists various international monetary systems and foreign exchange rate which not only manage domestic economy of country but also international trade issue. These include: Fixed rate Floating rate Forward rate Spot rate Future rate Amongst these, we shall critically examine the fixed rate and how it can affect international trade as a whole. FIXED RATES According to the writer of ehow found on http://www.ehow.com/list_6804540_types-foreign-exchange-rates.html viewed on 30/12/10 it writes The smaller economies of developing countries adopt the use of fixed foreign exchange rates for trading and to attract foreign investments. By fixing its currency against the currencies of other countries, a country keeps export prices affordable and easy to international buyers and allows for trade surplus over time. Fixed currency rates also allow a country to assure foreign investors of the stable value of their investments in the country. However, under fixed rates, the monetary policies of a country can become ineffective when trying to stimulate domestic economic activities by consumers at the host country. Injecting more money into the economy would normally reduce a countrys currency value against foreign currencies under floating rates. As imports become more expensive, consumers would gradually focus their demand on domestic products, potentially lifting up the economy. With fixed rates, however, the exchange value of domestic currency does not move and more money means more buying power for imports. Such an outcome does not achieve policy makers intention to increase domestic demand. This is expedient in order to ensure that there is a close gap which would assist balance of payment; the international economy would be appreciative of a fixed rate of exchange as it would allow for free f low goods and services at a predicted price. (Reference: http://www.rba.gov.au/publications/confs/1993/intro-93.pdf assessed on 30/12/10) From the above citation from Adrian, it is obvious that fixed exchange rate has its benefits too which would help the international market. Below are some of the merits and demerits of the fixed exchange rate. MERITS OF FIXED EXCHANGE RATE 1. It reduces fluctuation in the value of currencies which can cause problems for firms engaged in Trade. When exchange rate is fixed, it allows for comfort in the desire of the foreign customers who wants to trade with the host country as they would know that the price agreed on for the commodities at the stated time would still be at a given exchange rate. Though the price of the commodity might change, but the exchange rate is known. 2. It allows for foreign firms to invest in countries where fixed exchange rate occurs. Some Japanese firms have said that the UKs reluctance to join the Euro and provide a stable exchange rates make the UK a less desirable place to invest. 3. When the cost of import and export increases, it will therefore increase the income of the host country and the other countries involved. 4. A well monitored exchange rate would assist the domestic companies to sell out there products to the international world without fear of pressure from exchange rate differences, thereby increasing the domestic market and encouraging the local manufacturers to produce more of their products which would be used for international trade. 5. Fixed exchange rate reduces drastically the expectations of inflation in an economy.  Inflation is reduced to a minimal if not zero. This is due to the fact that the one of the major factors that would have allowed for inflation which is differing exchange rate is absent. DEMERITS OF FIXED EXCHANGE RATES 1. To maintain a fixed level of the exchange rate may conflict with other macroeconomic objectives. 2. It is difficult to respond to temporary shocks. For example an oil importer may face a balance of payments deficit if oil price increases, but in a fixed exchange rate there is little chance to devalue. 3. It requires government intervention when there exists too much money in circulation and the fixed rate is affecting the countrys currency adversely. 4. In order to check the problems that may accrue to the countrys currency, the central bank with the government may have to increase interest rate which may not be conducive to the citizenry, leads to unemployment and might lead to recession. (Reference: http://www.economicshelp.org/macroeconomics/exchangerate/advantages-disadvantages-fixed.html assessed on 30/12/10) CONCLUSION From the above mentioned issues on foreign exchange basically on fixed and floating foreign exchange, it is obvious that the floating system of exchange would be better off as the dangers of fixed would be avoided. This is also the system widely used by most countries i.e. the floating exchange rate as it helps to readjust during inflation and deflation. Under a system of fixed exchange rates balance of payments equilibrium is disturbed by a fall in export sales. When the supply curve of foreign exchange moves sharply and the authorities do nothing, an excess demand for foreign exchange will come on the market and thereby causing the exchange rate to rise which means the home currency would depreciate. In order to guard against such happening the home authorities must enter the market, and close the gap by supplying foreign exchange from reserves. Thus the home currency may be supported at cost to the countrys reserves. This would drastically affect the financial reserve of the count ry. However, the implication of the adverse effect on the domestic market is also very crucial. But this is where the government intervention now matters. The government of the concerned countries would buy the currency which is in excess from the market so as to avoid deflation of its currency which could lead to a devastating market economy. A good example is the government of Australia as written by Adrian Blundell-Wignall. He wrote Australias economic relations with the rest of the world have undergone profound change over the past decade. The floating of the exchange rate opened goods markets to greater international competition and Australias pattern of international trade changed considerably. Concomitantly, increasing integration into world financial markets saw Australia drawing more heavily on foreign capital. In the past 15 years, two broad developments in the world economy have been particularly significant for Australia: financial market liberalisation and the emergence of t he newly industrialising countries in Asia. From the late 1970s, financial liberalisation (and, in particular, the removal of capital controls) made financial markets increasingly globalised. At times, these developments were associated with speculative capital flows that undermined attempts to reconcile managed exchange rates with domestic macroeconomic objectives. At the end of 1983, against the background of more general moves to deregulate the financial system, the Australian dollar was floated. Australia is a small commodity exporting country, subject to significant terms of trade shocks driven by the world commodity price cycle. Once the currency was floated, the nominal exchange rate was able to respond more rapidly to these external shocks, helping to cushion the domestic economy from the inflationary and deflationary pressures to which they gave rise. For example, falls in the terms of trade have been associated with real depreciation which has reduced the negative income effects of the terms of trade decline on exporters and has added stabilising stimulatory influence to the domestic economy. While movements in the currency have been largely driven by commodity prices, it is widely felt that the depreciation in the mid-1980s went beyond that justified by fundamentals. While the real exchange rate recovered in the second half of the 1980s and fell again in the early 1990s, in line with the behaviour of the terms of trade, the overall trend in the past two decades has been one of real depreciation. This downward trend in the real exchange rate occurred at a time when Australia also began to cumulate significantly larger external deficits, so that foreign debt was rising as a share of income. This too can be linked to the globalisation of world capital markets. The greater degree of integration of Australia into world financial markets meant that it became easier to attract capital from the rest of the world to finance investment independently of the level of national saving. There were two major investment booms in the 1980s associated with high real exchange rates and current account deteriorations. The first occurred around the time of the second oil price rise in the late 1970s/early 1980s, and resulted largely from improved prospects for the ene rgy and minerals sectors. The second was associated with the asset price boom later in the decade. Both episodes were accompanied by a build-up in Australias foreign liabilities and were followed by a world recession and falling commodity prices.

Positive Case for Compatibilism and the Free Will Problem

The concept of free will has been a point of contention for philosophers for several decades. One of the reasons for these diverging viewpoints is the debate on how exactly to define the word free. It would be misleading to attribute any one exclusive idea to the concept.However it is agreed neutrally that it is an exercise of an individual’s behavior in order for him to take moral responsibility for his actions. A person who takes on his moral responsibility is one who can chose to make decisions that are morally right or wrong. Thus, the blame or reward for the outcome of the decision falls squarely on his shoulders. It is understood that free will is an essential component of these decisions.Conceptually it can be understood how the pre-determined nature of the universe can casually affect our decisions to such a point where free will is no longer applicable. However the theory of compatibilism states that free will and determinism are not mutually exclusive. That they can exist together without conflict, that an individual can exercise free will when faced with pre-determined factors. This topic will analyze, synthesize and evaluate arguments related to the problems associated with the concept of free will and how compatibilism offers a solution to these problems (McKenna, 2004).In order to understand how compatibilism acts as a solution to the free will problem it is first important to understand that there are several concepts used attributed to free will. When these concepts are conjoined to others they invariably create several contradictions. In order to avoid these problems it is important to consider the classic formulation of free will which informs us of then several key factors associated with it. The first is that the individual has a choice to act in more than one way in a situation.However any action taken by an individual qualifies as an event with various causes that effect the individual’s decision. Thus, the cause is casually determined and the individual cannot act in any way other than what is pre-determined by these factors. It should be noted that the existence of free will is tantamount upon the fact that the individual has no extraneous source compelling him to act. Rather all his decisions making is contingent upon his own compulsion to follow his decisions in the face of alternate possibilities. It is only in such a case that freedom to assume moral responsibility exists (McKenna, 2004).John Martin Fincher is a philosopher who is responsible for refining the viewpoint that suggested that decisions which constitute the free will of an individual can be affected by a number of reasons. This proves why certain people can have different reactions to the same situation and rules out those individuals who have compulsive or neurotic behavior.The refined viewpoint by Martin Fincher is known as the reasons-responsiveness theory which states that even though there are considerations which may affect the d ecisions of an individual. The decision made it can still be considered to be an individual free will since the choice made is rationally based according to the factors affecting the individual (McKenna, 2004).Another concept attributed to Compatibilism is P.F Strawson’s concept of moral responsibility. This is similar to Hume’s concept and says that the practice of holding an individual morally responsible for his or her own actions is formed on the basis of both emotional and societal structures. He said that the existence of these critical responses is part of human nature defined by our basic emotional natures and cannot be abandoned, thus the fact that determinism affects our moral responsibility does not hold ground.However in certain cases an individual can choose to give up their moral judgments in favor of rationalizing the individuals actions can exist as well but only in the cases where the actions gains favors or losses to human life (Kane, 2002 p. 516-521) .There are of course objections to the theories of compatibilism. One of the principle arguments for incompatibilism comes from Carl Ginet. The argument given by him states that the power of an individual to affect change does not extend to factors such as those of nature that are by their very nature unchangeable.And if a certain fact affects a person directly and the consequences of that fact exist than the person will be affected by the consequences of that fact as well. Thus in the face of these facts determinism becomes true and since no one can change the facts that cause the situation, no one can affect the future (McKenna, 2004).

The Founding Leadership Truly Caused America s Independence

Arielle Devorah Mrs. McCall AP US History 19 October 2014 Although there are debates on whether the founders leadership truly caused America s independence, or they were simply a group of elitist liberals with personal interests, without the unparalleled leadership of the Founders in the Revolutionary period of America, we would not have the America we live in today. We owe the preservation of our rights, the constitution, the branches of government, and the whole notion of independence to the leadership and steadfastness of the Founders. They worked tirelessly through meetings, the creation and implementation of certain ideas, and their notable actions, which caused the United States to become an independent nation. The founders were†¦show more content†¦The congress was important because for the first time, after the boycotts of the colonists proved effective, delegates sat together and engaged in spirited debates. They discovered that they had more in common then they originally thought, and would later become a n important step in the unification of the colonies. The First Continental Congress, which occurred in 1774, met in Philadelphia. Every colony was represented except Georgia. The aim of this congress was to organize resistance to Parliament s Coercive Acts, which included the Boston Port Act, which closed the Boston Port until the reimbursement of the East India Company for the wrecking of their ships, the Quartering Act, which demanded that colonists house and feed British soldiers, and the Quebec Act,which granted the free practice of Catholicism and gave some land west of the Ohio River Valley to Canadians. The delegates at the Congress included significant Founders, such as George Washington, John Adams, and John Jay. They made sure the congress was being based on equality and the promotion of free debate. With the leadership of the founders, the Congress was able to

30 Top Mnemonics for Commonly Misspelled Words

A mnemonic—or  mnemonic device—can help students remember important facts and principles. Psych Central notes that a mnemonic is a technique people can use to help them improve their ability to remember something, adding: It’s a memory technique to help your brain better encode and recall important information. It’s a simple shortcut that helps us associate the information we want to remember with an image, a sentence, or a word. Students learn to rely on these little memory prompts, such as  ROY G BIV (for the sequence of colors in a rainbow), HOMES (for the names of the five Great Lakes), FANBOYS (for the coordinating conjunctions in English grammar), and Every Good Boy Does Fine (for the notes on the lines of the treble clef). Mnemonics for Life Though they are certainly a great help to school students, mnemonics—pronounced ne-mon-icks—arent just for children. In an article titled Stalking the Wild Mnemos: Research Thats Easy to Remember, educational psychologist Joel R.  Levin concluded:   Sufficient research evidence now exists to suggest that even skilled learners can become more skilled through mnemonic strategy acquisition and implementation. So while you may not admit it, you may sometimes fall back on mnemonics to recall the spellings of tricky words or commonly misspelled words. 30 Top Mnemonics Research suggests that the most effective devices tend to be the ones you make up yourself (and the sillier they are, the better). But some classic mnemonics can be very helpful. Below are 30 of the most popular spelling mnemonics. This word can accommodate a  double c and a double m.I â€Å"c† that you want to acquire it.When you  ascertain  a fact, be  as certain  as you can be.Gumbo lost an e in an argument.Bees will be coming to the becoming flowers near you.Never believe a lie.Dara checked the calendar every day.The cat’s egg is gory in this category.Eileen found herself at es in the cemetery.Emma faced a dilemma.Ed is  either here or there.Its hard to embarrass really righteous and serious students.A new environment will iron me out.Goofy Greg loved to exaggerate.I met my ex in PE;  what do you expect?That liar looks familiar.Generally, a general is your best ally.Mom ate immediately.In telling the gent, he showed he was intelligent.It would irritate me if you forgot the second r  in irritable, and don’t forget the table at the end.An island is land surrounded by water.I alone felt Elis loneliness.Miss Pell never misspells.Its necessary to remember the cesspool in the middle.Have a piece of the pie.Please keep quiet about my diet.Its better to give than  to receive.Rhythm helps your two hips move.Theres a rat in separate.Its truly hot in July. More on Mnemonics There are other types of mnemonic devices, including: Visual systems (creating a visual representation of the information)The mnemonic link system (creating a story based on a list)The count system (associating numbers with a series of items)The major system (converting numbers into consonant sounds) Mnemonics work by associating easy-to-remember clues with complex or unfamiliar data. Though mnemonics often seem illogical and arbitrary, their  nonsensical wording is what can make  them memorable. Teachers should  introduce mnemonics to students when the task  requires the memorization of information rather than understanding a concept. For example, memorizing the state capitals is a task that could be accomplished through a mnemonic device. Whether youre a student trying to ace that grammar homework assignment or research paper or an out-of-school adult seeking to brush up on your language skills, a few memory aids  and language tips can prove to be very useful.