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GLOBAL ECONOMICS (4.3 THE ASSET APPROACH (VERTICAL LINE MS IS US REAL…
GLOBAL ECONOMICS
4.3 THE ASSET APPROACH
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DOWNWARD-SLOPING FOREIGN RETURN CURVE SHOWS RELATIONSHIP BETWEEN EXCHANGE RATE AND EXPECTED DOLLAR RATE OF RETURN ON FOREIGN DEPOSITS
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4.4 / 4.5
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IMPORTANT PRINCIPLES
FIXED EXCHANGE RATE: MEANS TO PROMOTE STABILITY IN TRADE AND INVESTMENT, REPRESENTED BY ZERO EXPECTED DEPRECIATION
INTERNATIONAL CAPITAL MOBILITY: MEANS TO PROMOTE INTEGRATION, EFFICIENCY AND RISK SHARING
MONETARY POLICY AUTONOMY: DESIRED AS MEANS TO MANAGE THE HOME ECONOMY'S BUSINESS CYCLE, REPRESENTED BY ABILITY TO SET THE HOME INTEREST RATE INDEPENDENTLY OF FOREIGN INTEREST RATE
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