11.2 Exchange rates

Evaluate the effect of a rise in the exchange rate on the achievement of the macroeconomic aims of a country. [20]

Evaluate the effect of a fall in the exchange rate on the achievement of the macroeconomic aims of a country. [20]

A government's decision to move from a fixed exchange rate to a free market floating exchange rate will solve the problem of unemployment in the short run but will cause higher rates of inflation in the long run. Evaluate this statement. [25]

Discuss whether there is likely to be a conflict when a government attempts to fix exchange rates while at the same time introducing policies to decrease the level of inflation. [13]