Verified Document

Supply And Demand Curve, Why Argentina Had Essay

¶ … supply and demand curve, why Argentina had to give up fixed exchange rate in 2001 Demand and supply are normally directly proportional which means as demand of a product increases, its supply normally increases too. In the case of Argentina which had fixed exchange rate till 2001 but had to give that up, demand and supply principles came into play in different ways. For one, we must understand how demand of anything would affect exchange rate. When Argentina's economy was prospering and its products were in high demand, it was primarily because of those products were cheaper for other markets. However as soon as the demand reached a certain point, fear of overvaluation of currency also emerged which means that when it was felt that Argentina products were becoming expensive in the foreign markets not because the prices had been changed but...

With changes in exchange rate against dollar, Argentinian products became less popular and its exports decreased. This means that with lower demand, supply had to be curtailed too. This led to a budget deficit which means that the country now did not have enough revenue coming in to fund all its ventures repay its debt and take care of its other financial liabilities.
This also meant that now foreign exchange was no longer coming in as rapidly or in the same amount as before. When foreign exchange reserves began depleting, this only meant one thing: peso was about to lose its value. When pegged against dollar, as in most fixed exchange rate economies, foreign exchange depletion can cause devaluation of local currency. For this reason in 2001, the government decided to give up fixed…

Sources used in this document:
PRICE

REFERENCE

Rajan, Ramkishen S. 2002. "Argentina and East Asia: The Peg Does It Again." Mimeo, University of Adelaide.
Cite this Document:
Copy Bibliography Citation

Related Documents

Inflation, Unemployment and Phillips Curve
Words: 14932 Length: 50 Document Type: Dissertation

2.5. Limitations of the study At the level of the limitations, these refer to the usage of secondary information, as opposed to the collection of primary data through the direct analysis of the Chinese market. This limitation is nevertheless addressed through the integration of multiple sources of valid and verifiable information, leading as such to the creation of solid, relevant and reliable findings. The second limitation is one common to all research

Central Banks What Criteria Are,
Words: 10788 Length: 35 Document Type: Dissertation

Under the arrangement, moreover, a country with efficient production and a favored competitive position (including as enhanced by new capital goods) is rewarded with rising income and reduced unemployment. No grand scheme of state or international planning and direct control is required. Exchange rates are for the most part fixed under the classical gold-flows mechanisms (say, $/£ const. within fixed limits), as stated, and adjustments to trade imbalances

Wal-Mart Analysis Industry Information in
Words: 3480 Length: 12 Document Type: Thesis

Corporate Mission As the largest mass merchandiser in the world, Wal-Mart's work in supply chain execution, research, and policies defines best practices for the broader high volume retailing industry worldwide. Wal-Mart is comprised of three operating segments including the Wal-Mart stores, Sam's Club and the International Stores. The typical Wal-Mart discount store as 50 departments or more and a few are offering groceries in addition to apparel, fabrics, stationery and books,

Homebuilding Industry the Industry Dominant Economic Features
Words: 3729 Length: 10 Document Type: Term Paper

Homebuilding Industry The Industry Dominant Economic Features Market Size and Rivals: Pace of Process and Product Technology Change Economies of Scale in Purchasing PORTER'S FIVE FORCES Industry Competitors Threat of New Entrants Substitutes Suppliers Buyers THE DRIVERS OF CHANGE IN THE INDUSTRY AND THEIR IMPACT Demographics The Economy and Interest Rates COMPANY POSITION Centex Corporation Horton Pulte Homes KEY SUCCESS FACTORS FOR COMPETITIVE SUCCESS Understanding the Markets Understanding Local Regulations Reputation INDUSTRY'S ATTRACTIVENESS, LONG-TERM PROFITABILITY AND CONCLUSION HOMEBUILDING INDUSTRY The homebuilding industry plays a major role in the United States economy, as a significant

LNG Process Risk Safety: Modeling
Words: 5099 Length: 20 Document Type: Thesis

The main hazards related to LNG include: Rupture due to Corrosion Rupture while excavation Rupture while excavation Rupture during an earthquake Rupture due to mechanical failure Rupture at compressor Rupture at inspection stations Uncontrolled detonation of explosives Blow-out of gas at head and subsequent fire Gas leak from infrastructure Fire involving combustible Construction damage LPG or Diesel Diesel pump fire involving equipment brittle fracture valve Leaks Welding failure welding casting failure Mechanical overstressing of equipment Vibration pump Corrosion joint Erosion Failure due to external loading or impact Internal Explosion Underground pipe

Impact of Local Economic Development Initiatives
Words: 4311 Length: 15 Document Type: Term Paper

Local Economic Development Initiatives THE IMPACT OF LOCAL ECONOMIC DEVELOPMENT The Concept of Sustainable Rural Communities in Local Areas The Concept of Rural Development in Local Areas The Concept of Endogenous Development Initiatives in Local areas Transformation is key when it comes to local economic development initiatives. Ever since World War II economies in so many different rural areas have been faced with the rising harsh economic circumstances that have been threatening people's everyday

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now