Question

The Special Drawing Right's value for this quantity is defined by a weighted, five-part basket. Along with the price level, this quantity's stability may be preserved through sterilization. The Mundell–Fleming model predicts that this quantity cannot stay constant if capital flows are unregulated and monetary policy is independent. (0[1])This quantity's long-term level can be roughly predicted using (*) purchasing power parity, which relies on the law of one price. Crawling pegs prevent this quantity from fluctuating too quickly. Governments may intentionally lower this quantity (0[1])to increase exports in a policy called devaluation. (10[1])For 10 points, name this ratio, the relative value of one currency to another. (10[2])■END■

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