Sep 07, 2017 · View Homework Help - What backs the U.docx from ENGINEERIN 3200 at Delft University of Technology. What backs the U.S. dollar? Include the distinction between commodity money and fiat money in your
The formula given is $ V = 1/P Now when the Price level goes down from 1 to 0.75 the formula becomes like $ V = 1/0.75 = 1.3333 The value of dollar when the price level was 1 was equal at 1 . When the price level went down to 0.75 the value of money rose by .33 which is 33.3 percent .
Learning Objective: 12-03 What "backs" the money supply Level: Difficult McConnell - Chapter 12 #48 Other: Pick-up Type: Calculation 49. If the price index rises from 100 to 120, the value of the dollar: (p. 291) A. may either rise or fall. B. will rise by 16.67 percent. C. will fall by 16.67 percent. D. will rise by 20 percent.
Learning Objective: 12-03 What "backs" the money supply Level: Easy McConnell - Chapter 12 #41 Other: Pick-up Type: Definition 42. The money supply is "backed": (p. 291) A. by the government's ability to control the supply of money and therefore to keep its value relatively stable. B. by government bonds. C. dollar-for-dollar with gold and silver. D. dollar-for-dollar with gold bullion.
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Since the end of World War II, the dollar has been the world’s most important currency. It is the most commonly held reserve currency and the most widely used currency for international trade and other transactions around the world. The centrality of the dollar to the global economy confers some benefits to the United States, including borrowing money abroad more easily and extending the reach of U.S. financial sanctions.
The dollar’s role as the primary reserve currency for the global economy allows the United States to borrow money more easily and impose painful financial sanctions. But some experts say the costs to areas such as the Rust Belt are too high to bear.
Currency Reserves. A reserve currency is a foreign currency that a central bank or treasury holds as part of its country’s formal foreign exchange reserves. Countries hold reserves for a number of reasons, including to weather economic shocks, pay for imports, service debts, and moderate the value of its own currency.
Factors that contribute to the dollar’s dominance include its stable value, the size of the U.S. economy, and the United States’ geopolitical heft. In addition, no other country has a market for its debt akin to the United States’, which totals roughly $18 trillion.
Some research has shown that the dollar’s outsize role in international trade can also have negative consequences for the global economy. As a country’s currency weakens, its goods exports should become cheaper and thus more competitive.
The United States is also harmed by currency manipulation —when another country holds down the value of its currency to maintain a large trade surplus. A country that is running a trade surplus can face pressure to let its currency appreciate, making its goods more expensive and curbing exports.
Moreover, the most commonly floated alternatives—the euro, the renminbi, and the IMF’s Special Drawing Rights—have their own problems. Euro . The euro is the second most used reserve currency, accounting for roughly 20 percent of global foreign exchange reserves.
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