Changes around the world All of you young graduates, passing out with degrees today, are a delightful sight. My mind goes back to my own college days. Of course, my time took place roughly half way between the discovery of fire and the invention of the ipad!!! The world was, maybe a little bit different then!
Because wages are sticky in the short run, a fixed exchange rate would force the economy to adjust to terms-of-trade shocks mainly through changes in output and employment - and the result would be exaggerated swings in economic activity.