Familiarize ourselves with exchange rate arrangements

And theoretical reasoning, which

Requires your

Warm-up

Before you start reading the unit think and try to answer the following questions:

1. What were the exchange rate arrangements of the Bretton Woods Monetary System?

2. What/who defines the exchange rate regimes?

3. What influences the value of the currency exchange rate?

4. Does the exchange rate regime adjust the nation’s balance of payments automatically?

5. Can the exchange rate be stabilized?

Rapid Reading (skimming, scanning, reading for general understanding

Of the basic Text 9.4)

Work in pairs or small groups.

1. Skim the text to find out what it is about in general. Do not try to read or understand the text in

Detail for this activity.

Find the main themes in part II and think of a suitable heading for each one. Make a note of

These headings.

Scan the text to find the graphs. Discuss them with a partner.

Make comments on the text saying what seems most interesting to you. Compare the information

Gained from the text with the information which you gained at your specialized lectures.

Discuss it in a small group.

Basic Text. Exchange Rate Rates

Freely Floating Exchange Rates (Part I)

Freely floating exchange rates are determined by the unimpeded forces of demand and supply.

Let us examine the rate, or price, at which American dollars might be exchanged for, say, British