Since the inception of a floating currency exchange rate system, the Australian dollar has declined by over 30% and as a result many economist have warranted the return of the fixed exchange rate. But is it really worth it? To see which system suits Australia best, we need to understand what the difference is between these two methods. So what is a floating exchange rate system? Do you know... A free floating exchange rate is one …
showed first 75 words of 522 total

showed last 75 words of 522 total
…exchange rate system, automatically alters the currency value in times of change. For example, investment demands falls unexpectedly, the tendency for domestic interest rates to fall will induce international capital outflows, causing the currency to depreciate, The improved competivness will increase net exports, restoring aggregate demand. In a fixed exchange economy, this solution could only be found by a savvy quick thinking government, who decided to change fisical policy in order for a currency depreciation.