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1. Protectionist policies implemented in a small open economy with a trade deficit have the effect...
31. Starting from a small open economy with balanced trade, if large foreign countries increase their domestic gover...
31. Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase: A) investment in the small open economy. B) saving in the small open economy. C) exports by the small open economy. D) imports by the small open economy.
Consider a parameter configuration such that a small open economy is currently running a trade balance deficit. Many g...
Consider a parameter configuration such that a small open economy is currently running a trade balance deficit. Many governments have in the past implemented capital controls, for example, a legal restriction that prevent foreign agents from purchasing domestic financial assets. Presumably, the idea here is that a trade balance deficit is a ‘bad thing,’ and that the capital controls will serve to prevent an ‘excessive’ deficit from occurring. Use the theory developed here to show that while capital controls can...
5. Consider a small open economy that is currently running a trade deficit. a. With the...
5. Consider a small open economy that is currently running a trade deficit. a. With the help of a graph, what would happen to the real interest rate, the trade deficit, and desired levels of saving and investment if government expenditures were to increase? b. With the help of another graph, what would happen to the real interest rate, the trade deficit, and desired levels of saving and investment if consumption expenditures were to decrease?
Problem 3. Protectionism. Consider an open economy experiencing a trade deficit. The current president desires to...
Problem 3. Protectionism. Consider an open economy experiencing a trade deficit. The current president desires to elimitate the trade deficit. The president considers three policies: Policy 1: Impose restrictions on imports (such as quotas). Policy 2: Provide domestic exporters with simplified regulation to incentiveze them to export more. Policy 3: Provide domestic exporters with subsidies to incentivize them to export more. The program costs a substantial amount of money to the government (assume the expenses on the program are part...
Suppose Country X is a small open economy with a huge trade deficit. Recently, her government...
Suppose Country X is a small open economy with a huge trade deficit. Recently, her government suggests a reduction in income tax. Using the Classical Theories, explain what will happen to net capital outflow and real exchange rate in the long run. Explain the impact on the size of her trade deficit.
12. In a small open economy, starting from a position of balanced trade, if the government...
12. In a small open economy, starting from a position of balanced trade, if the government increases domestic government purchases, this produces a tendency toward a trade _and net capital outflow. A) deficit; negative B) surplus; positive C) deficit; positive D) surplus; negative
In a small open economy with flexible exchange rates and perfectly flexible prices, how does an...
In a small open economy with flexible exchange rates and perfectly flexible prices, how does an increase in import tariffs affect net exports and the volume of trade? (Hint: Volume of trade is the sum of exports plus imports)
1. Which is not an effect of increases in gov. deficit spending? a) Capital inflow increase...
1. Which is not an effect of increases in gov. deficit spending? a) Capital inflow increase b)Increase in imports c)Increase in interest rates d)Decrease in exports e)Decrease in the trade deficit 2. The twin deficits effects is used to describe simultaneous deficits in the USA gov. budget and: a)International trade b)Monetary policy c)Gov. expenditures d)unemployment e)None of these 3. If an expansionary monetary policy increases the supply of US dollars, what effect will this have on the US dollar value...
ercise 5.8: Consider a parameter configuration such that a small open economy is currently running a...
ercise 5.8: Consider a parameter configuration such that a small open economy is currently running a trade balance deficit. Many governments have in the past implemented capital controls, for example, a legal restriction that prevent for- eign agents from purchasing domestic financial assets. Presumably, the idea here is that a trade balance deficit is a bad thing,' and that the capital controls will serve to prevent an 'excessive deficit from occurring. Use the theory developed here to show that while...
1. “The U.S. trade deficit increased in February, as net exports fell victim to a strong...
1. “The U.S. trade deficit increased in February, as net exports fell victim to a strong U.S. dollar and continued economic weakness abroad. Foreign trade once again is proving to be a drag on overall U.S. economic growth, though domestic demand still appears strong.” The Wall Street Journal. What monetary policy action could be used to raise U.S. net exports? Explain how this change in interest rates would affect the value of the U.S. dollar, and in turn, both the...
31. Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase: A) investment in the small open economy. B) saving in the small open economy. C) exports by the small open economy. D) imports by the small open economy.
5. Consider a small open economy that is currently running a trade deficit. a. With the help of a graph, what would happen to the real interest rate, the trade deficit, and desired levels of saving and investment if government expenditures were to increase? b. With the help of another graph, what would happen to the real interest rate, the trade deficit, and desired levels of saving and investment if consumption expenditures were to decrease?
Problem 3. Protectionism. Consider an open economy experiencing a trade deficit. The current president desires to elimitate the trade deficit. The president considers three policies: Policy 1: Impose restrictions on imports (such as quotas). Policy 2: Provide domestic exporters with simplified regulation to incentiveze them to export more. Policy 3: Provide domestic exporters with subsidies to incentivize them to export more. The program costs a substantial amount of money to the government (assume the expenses on the program are part...
Suppose Country X is a small open economy with a huge trade deficit. Recently, her government suggests a reduction in income tax. Using the Classical Theories, explain what will happen to net capital outflow and real exchange rate in the long run. Explain the impact on the size of her trade deficit.
12. In a small open economy, starting from a position of balanced trade, if the government increases domestic government purchases, this produces a tendency toward a trade _and net capital outflow. A) deficit; negative B) surplus; positive C) deficit; positive D) surplus; negative
ercise 5.8: Consider a parameter configuration such that a small open economy is currently running a trade balance deficit. Many governments have in the past implemented capital controls, for example, a legal restriction that prevent for- eign agents from purchasing domestic financial assets. Presumably, the idea here is that a trade balance deficit is a bad thing,' and that the capital controls will serve to prevent an 'excessive deficit from occurring. Use the theory developed here to show that while...
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