Homework Answers
A reduction in the government budget deficit increases aggregate demand and therefore increases net exports and the real exchange rate depreciates. Hence, option(B) is correct.
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10. In the basic version of a small open economy model, a reduction in the government's...
35. If the information technology boom increases investment demand in the basic model of a small...
35. If the information technology boom increases investment demand in the basic model of a small open economy, then net exports and the real exchange rate A) increase; appreciates B) increase; depreciates decrease; appreciates D) decrease; depreciates C)
40. In the basic model of a small open economy, if consumers shift their preferences toward...
40. In the basic model of a small open economy, if consumers shift their preferences toward foreign cars, then net exports: A) fall and the real exchange rate falls. B) fall but the real exchange rate remains unchanged. C) remain unchanged but the real exchange rate falls. D) and the real exchange rate remain unchanged.
8) In the small open economy in the long run model, Savings is A) dependent on...
8) In the small open economy in the long run model, Savings is A) dependent on the real interest rate B) influenced by Tariffs. C) independent of the real interest rate D) determined by Liquidity Preferences 9) In the small open economy, the real interest rate increases when: A) net exports increase. B) expected inflation increases C) a large foreign country cuts taxes. D) net export decreases. 10) The inflation rate will increase when all the following happens except: A)...
Use the model of the small open economy (Apply the small open economy model of real...
Use the model of the small open economy (Apply the small open economy model of real exchange rate determination ) to predict what would happen to the trade balance, the real exchange rate, and the nominal exchange rate in response to each of the following events. draw a graph (be sure to label all points, shifts and curves) and provide a short verbal analysis of the impact on the trade balance, the real exchange rate and the nominal exchange rate)....
Recall the small open economy model we considered, and answer the following questions for a small...
Recall the small open economy model we considered, and answer the following questions for a small open economy named Atlas. For each of the slots labeled (a) through (d), indicate whether the policy listed to the leftmost column causes the variable listed in the upper row to rise, fall, or remain unchanged, and provide an explanation for your answer in each case. (13 pts) Atlas domestic investment (3pts) Contractionary a fiscal in Atlas Atlas net capital outflow (3pts) b Atlas...
Use the model of the small open economy (Apply the small open economy model of real...
Use the model of the small open economy (Apply the small open economy model of real exchange rate determination ) to predict what would happen to the trade balance, the real exchange rate, and the nominal exchange rate in response to each of the following events. draw a graph (be sure to label all points, shifts and curves) and provide a short verbal analysis of the impact on the trade balance, the real exchange rate and the nominal exchange rate)....
Use the long run model for a small open economy to determine the expected effect on...
Use the long run model for a small open economy to determine the expected effect on the equilibrium from a decrease in taxes (T). For each of the following variables, state whether it is expected to increase (+), decrease (–), remain unchanged (0), or whether the effect is indeterminate (?). Explain your answers. All variables are in real terms. (a) national savings (S) (b) net exports (NX ) (c) the real exchange rate (ε)
3. Recall the small open economy model we considered, and answer the following questions for a...
3. Recall the small open economy model we considered, and answer the following questions for a small open economy named Atlas. For each of the slots labeled (a) through (d), indicate whether the policy listed to the leftmost column causes the variable listed in the upper row to rise, fall, or remain unchanged, and provide an explanation for your answer in each case. (13 pts) Atlas domestic Atlas net capital Atlas real exchange Atlas net exports investment (3pts) outflow (3pts)...
7. Suppose that Canada imposes an import quota on automobiles. In the open-economy macroeconomic model, which of...
7. Suppose that Canada imposes an import quota on automobiles. In the open-economy macroeconomic model, which of the following curves would this quota shift? a. supply of loanable funds left b. demand for loanable funds left c. demand for Canadian dollars right d. supply of Canadian dollars left 8. Suppose the Canadian government imposed import quotas on agricultural products. According to the foreign-currency exchange market diagram, which of the following outcomes would most likely result? a. Both the demand and supply curves...
A small open economy is described by the following set of equations: C = 300 +...
A small open economy is described by the following set of equations: C = 300 + 0.6(Y − T) I = 700 − 80r NX = 200 − 50ε G = T = 500 (Balanced Budget) (M/P)^d = Y − 200r M = 3, 000 P = 3 r ∗ = 5 (a) Derive and graph the IS∗ and LM∗ curves. (b) Calculate the equilibrium exchange rate, income and net exports. (c) Assume a floating exchange rate. Calculate what happens...
35. If the information technology boom increases investment demand in the basic model of a small open economy, then net exports and the real exchange rate A) increase; appreciates B) increase; depreciates decrease; appreciates D) decrease; depreciates C)
40. In the basic model of a small open economy, if consumers shift their preferences toward foreign cars, then net exports: A) fall and the real exchange rate falls. B) fall but the real exchange rate remains unchanged. C) remain unchanged but the real exchange rate falls. D) and the real exchange rate remain unchanged.
3. Recall the small open economy model we considered, and answer the following questions for a small open economy named Atlas. For each of the slots labeled (a) through (d), indicate whether the policy listed to the leftmost column causes the variable listed in the upper row to rise, fall, or remain unchanged, and provide an explanation for your answer in each case. (13 pts) Atlas domestic Atlas net capital Atlas real exchange Atlas net exports investment (3pts) outflow (3pts)...
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