How are currency exchange rates established? (1 page, single spaced)
In the light of your response to question 1, explain what steps a national government (e.g, Japan today) takes to strengthen or weaken the exchange rate of its currency
Japan’s economic miracle of the 1950s through 1980s was rooted in pursuing an export-driven economy. In the 1970s, the fabled Four Dragons followed the Japanese export-oriented blueprint to spur economic growth (Four Dragons: Taiwan, South Korea, Singapore, Hong Kong). What role was played by the currency exchange rates of these countries to stimulate exports? (1-2 pages, single spaced)
Recently, a number of studies have concluded that the single greatest source of China’s fantastic economic trade performance has been the government’s policy to keep the national currency (the Renminbi [RMB], also called the Yuan) artificially cheap. Within China these days, there is a major debate raging among policy makers regarding this policy. A cheap currency is a mixed blessing, and while it can help some national industries, it can hurt others. Explain how a cheap RMB both helps and hurts China’s economic prospects. (2 pages, single spaced. This is a significant policy question that gets to the heart of exchange rate policies — no one page answer here! No copy pasting from the Internet!)
Since World War II, the dollar has served as the backbone of the international monetary system. (Prior to WW II, the English pound sterling served this role.) For the Almighty Dollar to reign in the global financial system, it was important to keep the dollar strong (i.e., relatively high exchange rate in respect to other currencies). Why did the US government pursue a strong dollar policy for so many decades? Since the economic crisis of 2008-2009, the dollar has weakened considerably against other key currencies, yet the Federal Reserve and Treasury Department have not taken steps to strengthen it. Why not? (1-2 pages, single spaced)
The Euro as a currency was introduced into circulation in the Eurozone in 2002. The idea of the Euro was to establish a single currency for the European Union in order to strengthen the overall economic performance of EU countries. While there are clear advantages to having a single currency (e.g., the US uses the dollar throughout the fifty states), the 2010 financial crisis of the European PIGS (Portugal, Ireland, Greece, and Spain) highlighted the perils of having one currency employed a great diversity of countries. There has even been speculation whether the Euro can survive in the long run. Briefly explain how the economic problems experienced by the PIGS in 2008 through 2010 surfaced significant weaknesses of implementing a one currency policy across Europe. (1-2 pages, single spaced)