1. The main reason(s) why governments sometimes chose to devalue their currencies is (are):

1.      There are the following reasons the government chose to devalue their currencies;

·         Devaluation, which is deliberate to decrease the value of the currency through the government. It is done for creating the exports cheaper for the foreign countries where its demand is increased.

·         The value of the Yen is esteemed because the exchange rate is changed from the 100 yens per USD to 80 Yens, whereas now this same USD buy the fewer yens the import value of the contract increases if the contract is written in dollars

·         According to the absorption theory, which is the payments of country balance only improves the output, which is greater than the absorptions. And this absorptions presents the expenditure of the services along with the goods.
2. What is the policy of sterilization? Give an example.

Sterilization is the monetary action for the central government. The central government strict the impacts of outflows as well as capital inflows through these actions for the money supply in an economy. This is done by the purchase along with the sale of the financial assets that gives the results of the manipulations value for the foreign currency. The policy of Sterilization is a very effective policy, and its main causes are to increase the supply of the USD, which is addressed in the below scenario. The cons of the sterilization policy increase the supply of the USD, which flow the back in the domestic country (Aizenman , 2008).

Examples

Form the reserves; the FED busy the Indian rupees with the USD. Supply of the INR reduced the foreign currency market as well as it also increases the amount of the dollars in circulation, therefore impact of USD versus INR. Through the selling government, the impact of the action is sterilized that will also reduce the amount of US dollars in circulations.

The next example is related to the currency of China that is increasing day by day due to the economic structure of the country. The US economy is also too much strong, and it is stronger than China. Due to this, there is trade war enable between China and America. This will damage the economy of both countries in the future. This must need to be stopped according to the policy of sterilization.
3. What is a financial crisis, what kind of financial crisis exists, and how they can be derived from each other? Please use class examples to elaborate on your answer. E.g. (Latin American financial crisis, the Asian financial crisis, US financial crisis, European financial crisis).

During 1998 as well as in 199, the Majority of Latin American suffered the severe of the economic recession, which is the corporations into the insolvency. In 2007 to 2009, the Financial crisis affected the Latin American and on the prices of the foods items in the country. Due to the financial crisis, the cost of the fertilizers is increased, which is also decreased agriculture rate. The supply of the cash drops along with the foods item, is affected by this. The demand is decreased, and the rate of production is decreased, which is also increased the rate of employment. Through the raw material, the Latin American countries respond to this country that is reduced it’s spending. Then to reduce the spending, the wages of the employees is also decreased (Ocampo, 2009).  

References of  governments sometimes chose to devalue