For a country with a floating exchange rate, which policy is most effective as a short-term...
For a country with a floating exchange rate, which policy is most effective as a short-term means to expand output, monetary or fiscal stimulus? Why?
Homework Answers
Monetary policy is most effective for a country with floating exchange rates.
Because as the interest rate goes down the dollar depreciates so import decreases and export increases.
Tourism and income from tourist visiting to country will increase.
This is an injection of fund into domestic economy which creates employment, output and income
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For a country with a floating exchange rate, which policy is
most effective as a short-term...
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers...
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? Only with increasing output Only with increasing the current account balance No, not with either goal Yes, with both goals In the short run, if taxes rise, output will_and the exchange rate will increase; appreciate increase; depreciate decrease; appreciate decrease; depreciate With a fixed...
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers...
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? Only with increasing output Only with increasing the current account balance No, not with either goal Yes, with both goals
Suppose a country switches from a flexible to a fixed exchange rate. Which of the following...
Suppose a country switches from a flexible to a fixed exchange rate. Which of the following will occur as a result of this change? A) Monetary policy will become a more effective tool for changing output. B) Fiscal policy will become a less effective tool for changing output. C) Both fiscal and monetary policy will become more effective in changing GDP. D) Both fiscal and monetary policy will become completely ineffective in changing GDP. E) none of the above Please...
19 20 QUESTION 19 A country with a floating exchange rate faces a short-run recession and...
19 20
QUESTION 19 A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? O Only with increasing output O Only with increasing the current account balance O No, not with either goal Yes, with both goals QUESTION 20 and output will In the short run, if the central bank decreases the money supply,...
An advantage of a floating exchange rate is that: It permits the country to conduct an...
An advantage of a floating exchange rate is that: It permits the country to conduct an independent monetary policy It causes wages in different regions of a country to be equal It raises the value of the currency to a higher level than could be achieved with a fixed rate It prevents inflation
With a fixed exchange rate, what would increase output in the short run? Contractionary fiscal policy...
With a fixed exchange rate, what would increase output in the short run? Contractionary fiscal policy Contractionary monetary policy Expansionary fiscal policy Expansionary monetary policy
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...
Fixed exchange rates and foreign macroeconomic policy Consider a fixed exchange rate system, in which a...
Fixed exchange rates and foreign macroeconomic policy Consider a fixed exchange rate system, in which a group of countries (called follower countries) peg their currencies to the currency of one country (called the leader country). Because the currency of the leader country is not fixed against the currencies of countries outside the fixed exchange rate system, the leader country can conduct monetary policy as it wishes. For this problem, consider the domestic country to be a follower country and the...
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....
With a floating exchange rate, contractionary monetary policy, as the U.S. pursued in the early 1980s,...
With a floating exchange rate, contractionary monetary policy, as the U.S. pursued in the early 1980s, causes the currency to ____ and output to ____. A) appreciate; rise B) appreciate; fall C) depreciate; rise D) depreciate; fall
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? Only with increasing output Only with increasing the current account balance No, not with either goal Yes, with both goals In the short run, if taxes rise, output will_and the exchange rate will increase; appreciate increase; depreciate decrease; appreciate decrease; depreciate With a fixed...
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? Only with increasing output Only with increasing the current account balance No, not with either goal Yes, with both goals
19 20
QUESTION 19 A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? O Only with increasing output O Only with increasing the current account balance O No, not with either goal Yes, with both goals QUESTION 20 and output will In the short run, if the central bank decreases the money supply,...
An advantage of a floating exchange rate is that: It permits the country to conduct an independent monetary policy It causes wages in different regions of a country to be equal It raises the value of the currency to a higher level than could be achieved with a fixed rate It prevents inflation
With a fixed exchange rate, what would increase output in the short run? Contractionary fiscal policy Contractionary monetary policy Expansionary fiscal policy Expansionary monetary policy
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