chapter  17
31 Pages

Macroeconomic policy and floating exchange rates

In Chapter 16, we investigated the effect of exchange rate changes on the equilibrium output level for the entire economy (GDP). To a lesser extent, we also examined the effect of exchange rate changes on a country’s equilibrium price level. As we explained in Chapters 14 and 15, there are a number of reasons why a country’s exchange rate is constantly changing over time.