Homework Answers
A country with fixed interest rate and perfect capital mobility inflation targets do not work well due to perfect capital mobility and fixed echange rate thus there the option C is incorrect.
In response to the fall in agg demand the firms first reduce the number of employees for production to lower the cost of production.
Investment is included in measurement of GDP
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Which of the following statements about a country with a fixed exchange rate and perfect capital...
Suppose that there is perfect capital mobility and fixed exchange rates. If there is an exogenous...
Suppose that there is perfect capital mobility and fixed exchange rates. If there is an exogenous increase in demand for home country's exports this will in the short run wered of 5.00 estion Select one: a. Decreases the domestic income and does not change the interest rates o b. Does not change the domestic income and interest rates c. Increases the domestic income and does not change the interest rates d. Increases the domestic income and interest rates e. Decreases...
2. Consider a small open country (Veniceland) with flexible exchange rate and perfect capital mobility. The economy is...
2. Consider a small open country (Veniceland) with flexible exchange rate and perfect capital mobility. The economy is at the short-run equilibrium, and the domestic and foreign bonds pay the same interest rate. The government aims at increasing households' consumption to stimulate an economic recovery. Which policy should the government adopt? [2p] a. b. Explain the main economic adjustments leading to the new short-run equilibrium income and interest rate. [4p] How does the policy of the government affect the balance...
1.With perfect capital mobility and other things equal, an exogenous increase in demand for a country's...
1.With perfect capital mobility and other things equal, an exogenous increase in demand for a country's exports will lead to ______ increase in the country's national income under fixed exchange rates than under flexible exchange rates. a. a greater b. a smaller c. the same d. a greater, a smaller, or the same; it is impossible to determine without more information 2.When a nation chooses to fix or float its currency exchange rate, it should consider a. only its domestic...
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...
2. Which of the following statements about aggregate demand is (are) correct? (x) The wealth effect...
2. Which of the following statements about aggregate demand is (are) correct? (x) The wealth effect helps explain the slope of the aggregate demand curve. This effect is relatively unimportant in the United States because money holdings are a small part of consumer wealth. (y) The interest-rate effect depends on the idea that increases in interest rates decrease the quantity of goods and services demanded. The interest-rate effect is the most important reason, in the case of the United States,...
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....
13. A small open economy with perfect capital mobility is characterized by all of the following...
13. A small open economy with perfect capital mobility is characterized by all of the following except that: A) its domestic interest rate always exceeds the world interest rate. B) it engages in international trade. its net capital outflows always equal the trade balance. D) its government does not impede international borrowing or lending,
Which of the following characteristics describe the US economy a) fixed exchange rates, open capital markets,...
Which of the following characteristics describe the US economy a) fixed exchange rates, open capital markets, flexible interest rates b) flexible exchange rate, open capital markets, control of monetary policy c) fixed exchange rate, closed capital markets, no control of monetary policy d) flexible exchange rate, open capital markets, no control over monetary policy
Which of the following is a monetary policy intended to rein in inflation? a. Reduce interest...
Which of the following is a monetary policy intended to rein in inflation? a. Reduce interest rates to increase investment spending b. Increase the money supply to shift the aggregate demand curve rightward c. Reduce the interest paid on banks' reserves d. Decrease the money supply to shift the aggregate demand curve leftward
Section A B3 Which of the following statements regarding taxation is incorrect? [1] As interest rates...
Section A B3 Which of the following statements regarding taxation is incorrect? [1] As interest rates increase, bond prices decrease. [2] As interest rates decrease, bond prices increase. [3] There is a positive relationship between the interest rate and bond prices. [4] If interest rates are high, the quantity of money demanded will tend to be low. [5] If interest rates are low, the quantity of money demanded will tend to be high. B4 Which of the following is not...
Suppose that there is perfect capital mobility and fixed exchange rates. If there is an exogenous increase in demand for home country's exports this will in the short run wered of 5.00 estion Select one: a. Decreases the domestic income and does not change the interest rates o b. Does not change the domestic income and interest rates c. Increases the domestic income and does not change the interest rates d. Increases the domestic income and interest rates e. Decreases...
2. Consider a small open country (Veniceland) with flexible exchange rate and perfect capital mobility. The economy is at the short-run equilibrium, and the domestic and foreign bonds pay the same interest rate. The government aims at increasing households' consumption to stimulate an economic recovery. Which policy should the government adopt? [2p] a. b. Explain the main economic adjustments leading to the new short-run equilibrium income and interest rate. [4p] How does the policy of the government affect the balance...
2. Which of the following statements about aggregate demand is (are) correct? (x) The wealth effect helps explain the slope of the aggregate demand curve. This effect is relatively unimportant in the United States because money holdings are a small part of consumer wealth. (y) The interest-rate effect depends on the idea that increases in interest rates decrease the quantity of goods and services demanded. The interest-rate effect is the most important reason, in the case of the United States,...
13. A small open economy with perfect capital mobility is characterized by all of the following except that: A) its domestic interest rate always exceeds the world interest rate. B) it engages in international trade. its net capital outflows always equal the trade balance. D) its government does not impede international borrowing or lending,
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