Homework Answers
Answer:
C) remain unchanged. Under flexible exchange rate regime, an appreciation of exchange rate shifts the IS curve through capital outflow induced by difference in domestic and international interest rate but it has no effect on LM curve.
Add Answer to:
According to the Mundell Fleming model an appreciation of the exchange rate will cause the LM*...
Exercise 3 (7 points): According to Mundell-Fleming (IS-LM-BP) model, which are the consequences (i.e the new...
Exercise 3 (7 points): According to Mundell-Fleming (IS-LM-BP) model, which are the consequences (i.e the new equilibrium compared with the equilibrium position before the policy) of an increase in public expenditure if exchange rates are fixed and there is capital immobility? 1 Increase in net exports, same income 21 Increase in income, reduction in net exports Incrase of income, depreciation of the exchange [3] Increase in the interest rate, decrease of income. [1 same income, same interest rate; ® Increase...
Q.3 The Mundell-Fleming model takes the world interest rate r* as an exogenous variable. Let's consider...
Q.3 The Mundell-Fleming model takes the world interest rate r* as an exogenous variable. Let's consider what happens when this variable changes. a. What might cause the world interest rate to rise? b. In the Mundell-Fleming model with a floating exchange rate, what happens to aggregate income, the exchange rate, and the trade balance when the world interest rate rises? In the Mundell Eleming model with fived exchange rate what happens to aggregate
The introduction of automatic teller machines, which reduces the demand for money, will,according to the Mundell–Fleming...
The introduction of automatic teller machines, which reduces the demand for money, will,according to the Mundell–Fleming model with fixed exchange rates have no change in income or net exports. True False The IS curve shifts to the right when interest rates decreases thereby increasing GDP. True False
According to the Mundell-Fleming model, under: a. floating exchange rates, a monetary expansion raises income, whereas...
According to the Mundell-Fleming model, under: a. floating exchange rates, a monetary expansion raises income, whereas a fiscal expansion does not, but under fixed exchange rates, a fiscal expansion raises income, whereas a monetary expansion does not b. both floating and fixed exchange rates, a monetary expansion raises income, but a fiscal expansion does not. both floating and fixed exchange rates, a fiscal expansion raises income, but a monetary expansion does not. d. floating exchange rates, a fiscal expansion raises...
answer the following: d. In the Mundell-Fleming model with floating exchange rates, explain what happens to...
answer the following:
d. In the Mundell-Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when taxes are raised. What would happen if exchange rates were fixed rather than floating?
1. If the money demand does not depend on the interest rate, then the LM curve...
1. If the money demand does not depend on the interest rate, then the LM curve ______. a. is horizontal b. is vertical c. shifts up to the right d. shifts down to the right 2. If money demand becomes more income elastic, the LM curve will __________. a. become flatter b. shift to the right c. become stepper d. shift to the left 3. The labour force is defined as _________. a. the total number of working age individuals...
1. Using the Mundell-Fleming model, describe the effects of: (a) A fiscal expansion under fixed and...
1. Using the Mundell-Fleming model, describe the effects of: (a) A fiscal expansion under fixed and flexible exchange rate regimes (30 per cent of marks) (b) A monetary expansion under fixed and flexible exchange rate regimes (30 per cent of marks) (c) An increase in the world interest rate under fixed and flexible exchange rate regimes (40 per cent of marks)
Consider the Mundell-Fleming short-run model of a small open economy under floating exchange rates described by...
Consider the Mundell-Fleming short-run model of a small open economy under floating exchange rates described by the following equations (1) through (7). Assume that there are free capital flows and that interest rate parity holds so that where 5 is the world interest rate. (1) Cu 400+0.8 (Y-D: (2) 1 = 850-60r (3) G = 1200; (4) T=1000 + 0.25Y: (5) NX = 600 - 200e : (6) Y=C+I+G+ NX; (7) (M/P )= 0.5Y -50rt. Equation (6) is the goods...
Problem 2 (4 points) a) Show graphically using the Mundell-Fleming model the of an introduction of export promotion...
Problem 2 (4 points) a) Show graphically using the Mundell-Fleming model the of an introduction of export promotion tools (that improve net exports exogenously, irrespective of the exchange rate). Assume that a country has a fixed exchange rate and perfect capital mobility. (2 p) b) Will the introduction of export promotion policy tools improve net exports (current account balance) in equilibrium, as argued by many politicians? Provide an appropriate graph and explain. (2 p)
Problem 2 (4 points) a) Show...
12) In the IS-LM Model, assuming a downward sloping IS curve and an upward sloping LM...
12) In the IS-LM Model, assuming a downward sloping IS curve and an upward sloping LM curve; an increase in consumer wealth is going to A) cause a rightward shift of the IS curve. B) cause a rightward shift of the LM curve. C) cause a movement along the IS curve D) cause a leftward shift of the LM curve.
Exercise 3 (7 points): According to Mundell-Fleming (IS-LM-BP) model, which are the consequences (i.e the new equilibrium compared with the equilibrium position before the policy) of an increase in public expenditure if exchange rates are fixed and there is capital immobility? 1 Increase in net exports, same income 21 Increase in income, reduction in net exports Incrase of income, depreciation of the exchange [3] Increase in the interest rate, decrease of income. [1 same income, same interest rate; ® Increase...
Q.3 The Mundell-Fleming model takes the world interest rate r* as an exogenous variable. Let's consider what happens when this variable changes. a. What might cause the world interest rate to rise? b. In the Mundell-Fleming model with a floating exchange rate, what happens to aggregate income, the exchange rate, and the trade balance when the world interest rate rises? In the Mundell Eleming model with fived exchange rate what happens to aggregate
According to the Mundell-Fleming model, under: a. floating exchange rates, a monetary expansion raises income, whereas a fiscal expansion does not, but under fixed exchange rates, a fiscal expansion raises income, whereas a monetary expansion does not b. both floating and fixed exchange rates, a monetary expansion raises income, but a fiscal expansion does not. both floating and fixed exchange rates, a fiscal expansion raises income, but a monetary expansion does not. d. floating exchange rates, a fiscal expansion raises...
answer the following:
d. In the Mundell-Fleming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when taxes are raised. What would happen if exchange rates were fixed rather than floating?
Consider the Mundell-Fleming short-run model of a small open economy under floating exchange rates described by the following equations (1) through (7). Assume that there are free capital flows and that interest rate parity holds so that where 5 is the world interest rate. (1) Cu 400+0.8 (Y-D: (2) 1 = 850-60r (3) G = 1200; (4) T=1000 + 0.25Y: (5) NX = 600 - 200e : (6) Y=C+I+G+ NX; (7) (M/P )= 0.5Y -50rt. Equation (6) is the goods...
Problem 2 (4 points) a) Show graphically using the Mundell-Fleming model the of an introduction of export promotion tools (that improve net exports exogenously, irrespective of the exchange rate). Assume that a country has a fixed exchange rate and perfect capital mobility. (2 p) b) Will the introduction of export promotion policy tools improve net exports (current account balance) in equilibrium, as argued by many politicians? Provide an appropriate graph and explain. (2 p)
Problem 2 (4 points) a) Show...
12) In the IS-LM Model, assuming a downward sloping IS curve and an upward sloping LM curve; an increase in consumer wealth is going to A) cause a rightward shift of the IS curve. B) cause a rightward shift of the LM curve. C) cause a movement along the IS curve D) cause a leftward shift of the LM curve.
Most questions answered within 3 hours.
-
explain and comment out your answer
43. How many address lines are required to address a...
asked 1 minute from now -
A sample of 45 observations is selected from a normal
population. The sample mean is 49,...
asked 13 minutes ago -
A construction company is planning to bid on a building
contract. The bid costs the company...
asked 11 minutes ago -
A firm operating in a purely competitive environment is faced
with a market price of $250....
asked 17 minutes ago -
•Let’s say someone claims the average population size is
600 feet squared and the housing authority...
asked 25 minutes ago -
Cynaide is a deadly poison that blocks the last step in the
electron transport chain of...
asked 29 minutes ago -
Your friend tells you that there is a vending machine on campus
that dispenses M&M packs...
asked 44 minutes ago -
What advantages are there to using piperidine rather than
hydroxide as a base?
asked 43 minutes ago -
7. The life of a Freeze Breeze electric fan is normally
distributed with a mean 4...
asked 46 minutes ago -
1. A 751 mL NaCl solution is diluted to a volume of 1.06 L and a...
asked 51 minutes ago -
8
A $20,000 face value STRIPS is currently quoted at 38.642 and
has 8 years to...
asked 51 minutes ago -
The current exchange rate between the Japanese yen and
the US dollar is 120 yen per...
asked 53 minutes ago