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shift to left, falls, rises
(With fixed exchange rate, decrease in foreign interest rate decreases the foreign returns so the foreign return curve shifts to the left. This decreases the money supply. A decrease in money supply shifts the money supply curve to the left which shows an increase in the interest rate.)
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Question 3 10 pts The home country is operating on fixed exchange rates and foreign interest...
1. A decrease in interest rates will ___ the cost of acquiring funds for investment projects,...
1. A decrease in interest rates will ___ the cost of acquiring funds for investment projects, other things equal. -Increase -Have an indeterminate effect on -Not change -Decrease 2. The IS curve -Shows combinations of interest rates and output levels where the goods market is in equilibrium -Is upward sloping because higher interest rates increase aggregate demand -Was created by the CIA in the 1960s as anti-Soviet propaganda -Shifts if the money supply changes 3. If firms invent new technologies,...
1a. In the foreign exchange market, a decrease in the world demand for Japanese exports a....
1a. In the foreign exchange market, a decrease in the world demand for Japanese exports a. shifts the demand curve for yen leftward, which causes the yen to appreciate. b. shifts the demand curve for yen rightward, which causes the yen to appreciate. c. shifts the demand curve for yen rightward, which causes the yen to depreciate. d. shifts the demand curve for yen leftward, which causes the yen to depreciate. 1b. A relatively high rate of inflation in the...
5. Changes in the foreign-exchange market The following questions focus on the exchange rate between the euro and the D...
5. Changes in the foreign-exchange market The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged Shift the appropriate curve or c on the following graph to illustrate how this affects the market for Danish kroner if...
Inter est rate (percent) S1 S2 r1 Di Quantity of money per period What happens in...
Inter est rate (percent) S1 S2 r1 Di Quantity of money per period What happens in the aggregate economy (ADAS model) as a result of the increase in money supply and reduction in interest rates? The aggregate demand curve shifts to the left. The aggregate demand curve shifts to the right. The short-run aggregate supply curve shifts to the right. The short-run aggregate supply curve shifts to the left.
Scenario: Country X and Country Y production amount of physical capital stock available to each country is also equal. However, the labor supply for Country X is Ho while the labor supply for Cou...
Scenario: Country X and Country Y production amount of physical capital stock available to each country is also equal. However, the labor supply for Country X is Ho while the labor supply for Country Y is Hy identical aggregate production functions as shown in the figure below. The Output 0 H, H, Efficiency units of Labor 8) Refer to the scenario above. A one-unit increase in the efficiency units of labor will lead to in output in Country X than...
What happens when the price level rises? a. Interest rates rise, so firms increase investment. b. Interest rates...
What happens when the price level rises? a. Interest rates rise, so firms increase investment. b. Interest rates rise, so firms decrease investment. c. Interest rates fall, so firms increase investment. d. Interest rates fall, so firms decrease investment. 44. Which of the following shifts money demand to the left? a. an increase in the price level b. a decrease in the price level c. an increase in the interest rate d. a decrease in the interest rate 45. If the world real interest rate exceeds the Canadian real interest...
Suppose a country wants to maintain its exchange rate at the current level, but it is...
Suppose a country wants to maintain its exchange rate at the current level, but it is worried that market forces will push it down (that is, make the currency less valuable relative to other countries’ currencies). (This is a problem that countries commonly face. A recent examplewas in Russia in 2014-15.) In an attempt to keep the exchange rate from falling, the country’s central bank adopts a tight money policy. 8. Quick review: if the central bank adopts a tight money policy, do interest...
QUESTION 3 Select all of the following that are true regarding interest rates and foreign exchange...
QUESTION 3 Select all of the following that are true regarding interest rates and foreign exchange rates: When domestic interest rates rise the domestic currency depreciates When a domestic currency depreciates, domestic interest rates rise Interest rate parity between countries is a reasonable assumption due to arbitrage and floating exchange rates When domestic interest rates rise due to monetary policy, the domestic currency appreciates solely because of the decreased supply of the domestic currency QUESTION 4 Select all that are...
As prices rise, a fixed money supply will be able to buy fewer goods and services....
As prices rise, a fixed money supply will be able to buy fewer goods and services. This real balance effect is due to a(n) reduction in the interest rate. Increase in aggregate demand Decline in the purchasing power of the fixed quantity of money. Increase in income. The international substitution effect exists because a Higher price level will reduce interest rates and stimulate foreign investment. Lower price level will make domestically produced goods less expensive relative to foreign goods. Higher...
1. If people expect higher inflation in the near future, the expected return on bonds rises/falls), and the deman...
1. If people expect higher inflation in the near future, the expected return on bonds rises/falls), and the demand for money (increases/decreases), leading to the rate of interest increasing/decreasing). 2. For the following questions, fill in the blanks below with: rises/falls/right/left/increase/decrease a. When real income increases, the demand curve for money shifts to the the interest rate _, everything else held constant. and b. A business cycle expansion increases income, causing money demand to interest rates to , everything else...
5. Changes in the foreign-exchange market The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged Shift the appropriate curve or c on the following graph to illustrate how this affects the market for Danish kroner if...
Inter est rate (percent) S1 S2 r1 Di Quantity of money per period What happens in the aggregate economy (ADAS model) as a result of the increase in money supply and reduction in interest rates? The aggregate demand curve shifts to the left. The aggregate demand curve shifts to the right. The short-run aggregate supply curve shifts to the right. The short-run aggregate supply curve shifts to the left.
Scenario: Country X and Country Y production amount of physical capital stock available to each country is also equal. However, the labor supply for Country X is Ho while the labor supply for Country Y is Hy identical aggregate production functions as shown in the figure below. The Output 0 H, H, Efficiency units of Labor 8) Refer to the scenario above. A one-unit increase in the efficiency units of labor will lead to in output in Country X than...
QUESTION 3 Select all of the following that are true regarding interest rates and foreign exchange rates: When domestic interest rates rise the domestic currency depreciates When a domestic currency depreciates, domestic interest rates rise Interest rate parity between countries is a reasonable assumption due to arbitrage and floating exchange rates When domestic interest rates rise due to monetary policy, the domestic currency appreciates solely because of the decreased supply of the domestic currency QUESTION 4 Select all that are...
1. If people expect higher inflation in the near future, the expected return on bonds rises/falls), and the demand for money (increases/decreases), leading to the rate of interest increasing/decreasing). 2. For the following questions, fill in the blanks below with: rises/falls/right/left/increase/decrease a. When real income increases, the demand curve for money shifts to the the interest rate _, everything else held constant. and b. A business cycle expansion increases income, causing money demand to interest rates to , everything else...
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