Suppose that net exports, NXt, are determined by the following expression:
NXt/Ȳt = αNX−βNX(rt−r∗t) (6),
where Ȳt is potential GDP and rt−r∗t is the difference between the domestic and the foreign real interest rate.
a. Explain the intuition behind expression (6).
b. Modify the IS curve below so that (6) is taken into account.
Ỹt= α − β (rt−r̃)
It specifies a negative relationship between short-run output, Ỹt, and the real interest rate, rt
c. Explain how a decrease in the domestic real interest rate affects short-run output in this economy.
Hi, I need answer for this question below.BR//Hassan suppose that net exports, NXt , are determined by the following expression: NXt Y¯ t = αNX − βNX(rt − r ∗ t ), where Y¯ t is potential GDP and rt − r ∗ t is the difference between the domestic and the foreign real interest rate. a. Explain the intution behind expression . b. Modify the IS curve . c. Explain how an increase in the domestic real interest rate...
Please I need today answer for This question and it is very important and I need solution for this issue with all the details , and help me with all the details.Please write your answer to me by typing, not by handwriting, so that I can read and understand your answer clearly.BR/Hassan. Consider the AS-AD model discussed in the course. Assume, initially, that the real interest rate only affects domestic investment. a. Write down the expressions for the AS and...
Hi, Please find some solution for this question below. I need your answer for this question very quickly.Br/H Consider the AS-AD model . Assume, initially, that the real interest rate only affects domestic investment. a. Write down the expressions for the AS and AD curves and interpret the expressions. What must be true of the model parameters and variables in the long-run equilibrium, i.e. in the steady state? b. Analyse the effects of a supply shock that causes a decrease in...
Q2)Consider two imaginary countries, indexed A and B. Each economy can be characterised by the model above, but the population is constant in both economies. In the steady state, GDP per worker in country A is 1.44 times that of country B and the ratio of physical investment to output is 0.3 in country A and 0.25 in country B. The rate of depreciation is the same in both countries. What must α be in order for the model to...
Describe the effects of contractionary monetary policy by the domestic central bank on output, the real interest rate, and net exports in both the domestic and foreign country, using a Keynesian model in the short run. What happens in the long run? (Word Limit: 100 words)
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Suppose political stability in the US as seen from abroad deteriorates and US assetsbecome less attractive to foreign investors. Assume that the US is a large openeconomy and that neither Congress nor the Federal Reserve Board takes action tocounter the speculative capital outflow.(1) Using the Mundell-Fleming model for a large open economy, state and showgraphically what would happen in the short run to each of the following:A) the US net capital outflow curveB) the IS and LM curvesC) the domestic...
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