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Suppose that there is perfect capital mobility and fixed exchange rates. If there is an exogenous...
1.With perfect capital mobility and other things equal, an exogenous increase in demand for a country's...
1.With perfect capital mobility and other things equal, an exogenous increase in demand for a country's exports will lead to ______ increase in the country's national income under fixed exchange rates than under flexible exchange rates. a. a greater b. a smaller c. the same d. a greater, a smaller, or the same; it is impossible to determine without more information 2.When a nation chooses to fix or float its currency exchange rate, it should consider a. only its domestic...
Macroland is a small open economy with perfect capital mobility and a fixed-exchange-rate system. Macroland is...
Macroland is a small open economy with perfect capital mobility and a fixed-exchange-rate system. Macroland is initially in the long-run equilibrium at the natural level of output with balanced trade. With the help of an appropriate diagram, compare the impact of a tax cut in the short run (when prices are fixed) and in the long run (when prices are flexible) on: 1. Output, 2. Consumption, 3. Investment, 4. Net exports 5. Exchange rate.
2. Consider a small open country (Veniceland) with flexible exchange rate and perfect capital mobility. The economy is...
2. Consider a small open country (Veniceland) with flexible exchange rate and perfect capital mobility. The economy is at the short-run equilibrium, and the domestic and foreign bonds pay the same interest rate. The government aims at increasing households' consumption to stimulate an economic recovery. Which policy should the government adopt? [2p] a. b. Explain the main economic adjustments leading to the new short-run equilibrium income and interest rate. [4p] How does the policy of the government affect the balance...
1. Under a floating exchange rate regime with a high degree of capital mobility, in the...
1. Under a floating exchange rate regime with a high degree of capital mobility, in the short run an expansionary fiscal policy will most likely create pressure on: a. the domestic currency to appreciate. b. the domestic currency to depreciate. c. monetary authorities to revalue the domestic currency. d. monetary authorities to devalue the domestic currency. 2. Under a floating exchange rate regime with a high degree of capital mobility, a change in the exchange rate value of domestic currency...
Which of the following statements about a country with a fixed exchange rate and perfect capital...
Which of the following statements about a country with a fixed exchange rate and perfect capital mobility is not correct? (a) Shocks to aggregate demand lead to large changes in output. (b) Domestic interest rates must match interest rates in other countries. (c) Inflation targeting works well. (d) Monetary policy cannot be used to stabilize the economy. What of the following statements about the first thing that firms do in response to a fall in demand is correct? (a) Reduce...
2. Within the Mundell-Fleming model assuming perfect capital mobility, analyse the effects of a positive shock...
2. Within the Mundell-Fleming model assuming perfect capital mobility, analyse the effects of a positive shock to money demand i.e., an increase in the demand for money for given levels of income and the interest rate). Consider the effect of the shock on income when the exchange rate is fixed and when it is flexible.
the possible answers: How will an expansionary fiscal policy affect exchange rates, via interest rates? Expansionary...
the possible answers:
How will an expansionary fiscal policy affect exchange rates, via interest rates? Expansionary Fiscal Policy select answer select answer Competitiveness decreases Competitiveness increases The domestic currency depreciates The domestic currency appreciates Income decreases Income increases Interest rates decrease Interest rates increase Imports decrease Imports increase Price level decreases Price level increases Trade deficit decreases Trade deficit increases
Venus Island is a small open economy with perfect capital mobility. The goods market, exchange rate...
Venus Island is a small open economy with perfect capital mobility. The goods market, exchange rate market and money market is in equilibrium when aggregate income/output is Y1, exchange rate is e1 and interest rate r1. Then the government implemented a contractionary fiscal policy. a. Use Mundell-Fleming model to show and explain, by referring to the events in the each of the markets, the predicted effects of the income tax increase. Assume that Venus Island uses a floating exchange rate....
please answer clearly thanks 2. Consider an open economy with perfect capital mobility. Analyze the effects...
please answer clearly thanks
2. Consider an open economy with perfect capital mobility. Analyze the effects of an increase in public spending G (AG> O) in the following cases: i. Flexible exchange rate [5p] ii. Fixed exchange rate [5p] Consider the effects on income, consumption, investments, interest rate, net exports, and exchange rate. Outline the main differences between the previous two cases
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the...
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the world consists of a small open economy (we call this domestic) and the rest of the world (we call this foreign). Answer the following questions with the aid of figures where appropriate a. How does an increase in domestic government expenditure affect trade balance and real exchange rate? (2 points] b. How does an increase in foreign government expenditure affect the trade balance and...
2. Consider a small open country (Veniceland) with flexible exchange rate and perfect capital mobility. The economy is at the short-run equilibrium, and the domestic and foreign bonds pay the same interest rate. The government aims at increasing households' consumption to stimulate an economic recovery. Which policy should the government adopt? [2p] a. b. Explain the main economic adjustments leading to the new short-run equilibrium income and interest rate. [4p] How does the policy of the government affect the balance...
Which of the following statements about a country with a fixed exchange rate and perfect capital mobility is not correct? (a) Shocks to aggregate demand lead to large changes in output. (b) Domestic interest rates must match interest rates in other countries. (c) Inflation targeting works well. (d) Monetary policy cannot be used to stabilize the economy. What of the following statements about the first thing that firms do in response to a fall in demand is correct? (a) Reduce...
2. Within the Mundell-Fleming model assuming perfect capital mobility, analyse the effects of a positive shock to money demand i.e., an increase in the demand for money for given levels of income and the interest rate). Consider the effect of the shock on income when the exchange rate is fixed and when it is flexible.
the possible answers:
How will an expansionary fiscal policy affect exchange rates, via interest rates? Expansionary Fiscal Policy select answer select answer Competitiveness decreases Competitiveness increases The domestic currency depreciates The domestic currency appreciates Income decreases Income increases Interest rates decrease Interest rates increase Imports decrease Imports increase Price level decreases Price level increases Trade deficit decreases Trade deficit increases
please answer clearly thanks
2. Consider an open economy with perfect capital mobility. Analyze the effects of an increase in public spending G (AG> O) in the following cases: i. Flexible exchange rate [5p] ii. Fixed exchange rate [5p] Consider the effects on income, consumption, investments, interest rate, net exports, and exchange rate. Outline the main differences between the previous two cases
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the world consists of a small open economy (we call this domestic) and the rest of the world (we call this foreign). Answer the following questions with the aid of figures where appropriate a. How does an increase in domestic government expenditure affect trade balance and real exchange rate? (2 points] b. How does an increase in foreign government expenditure affect the trade balance and...
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