Potential feedback effects of a currency's changing value
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I have to answer this question below in 250 words. I have been reading the chapter and don't fully understand this question:
Explain the potential feedback effects of a currency's changing value on inflation.
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Explain the potential feedback effects of a currency's changing value on inflation.
The potential feed back effect refers to the impact on the inflation with the change in currency value and the impact of the change in inflation on the currency value. We need to look at the changes in terms of whether the currency weakens or strengthens and its impact on inflation.
Let us first look at a weak currency. A weak currency implies that the currency is ...
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