Consider an open economy with flexible prices and flexible exchange rate. If the government reduces its...
Consider an open economy with flexible prices and flexible exchange rate. If the government reduces its spending, this will have a positive impact on net exports and could have a negative impact on the output of its trade partners. True or false?
Homework Answers
True, a reduction in the government expenditure will lower the interest rate in the market and depreciate the local currency, this will increase the exports as they are cheaper and reduce the imports making the trading nation poor. the given statement is true.
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Consider an open economy with flexible prices and flexible
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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)
The government of Pangea, a small open economy with a flexible exchange rate, has increased government...
The government of Pangea, a small open economy with a flexible exchange rate, has increased government spending by $20 billion. Economists argue that after the crowding-out effect on investment and the crowding-out effect on net exports, the increases in government spending will not affect aggregate demand. Arrange each statement in the proper sequence of events from first to last, to illustrate the reasoning behind this argument. First reduction in net exports due to the appreciation of the domestic currency increased...
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the...
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the world consists of a small open economy (we call this domestic) and the rest of the world (we call this foreign). Answer the following questions with the aid of figures where appropriate a. How does an increase in domestic government expenditure affect trade balance and real exchange rate? (2 points] b. How does an increase in foreign government expenditure affect the trade balance and...
Macroland is a small open economy with perfect capital mobility and a fixed-exchange-rate system. Macroland is...
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II. Consider an open economy with flexible exchange rates. Suppose output is at the natural level,...
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2. Consider a small open country (Veniceland) with flexible exchange rate and perfect capital mobility. The economy is...
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V. Consider an open economy in which the real exchange rate is fixed and equal to...
V. Consider an open economy in which the real exchange rate is fixed and equal to one. Consumption, investment, government spending, and taxes are given by C= 10 + 0.8(Y-T), l = 10, G = 10, and T= 10 Imports and exports are given by where Y" denotes foreign output. ECON 105B a. Solve for equilibrium output in the domestic economy, given Y". What is the multiplier in this economy? If we were to close the economy-so exports and imports...
V. Consider an open economy in which the real exchange rate is fixed and equal to...
V. Consider an open economy in which the real exchange rate is fixed and equal to one. Consumption, investment, government spending, and taxes are given by С 10 + 0.8(Y-T), l 10, G-, 10, and T-10 Imports and exports are given by IM 0.3Y and X 0.3Y where Y" denotes foreign output. ECON 10SB Solve for equilibrium output in the domestic economy, given Y. What is the multiplier in this economy? If we were to close the economy-so exports and...
Consider the following open economy. The real exchange rate is fixed and equal to one. Consumption, investment, governm...
Consider the following open economy. The real exchange rate is fixed and equal to one. Consumption, investment, government spending and taxes are given by: C = co + ci(Y-T), I = 7, G=G, and T=1 Imports and exports are given by: Q = my and X = rY* where asterisk denotes a foreign variable. a) Solve for equilibrium income in the domestic economy, given Y*. What is the multiplier in this economy? If we were to close the economy (so...
Question 100In an open economy with flexible exchange rates, monetary policy affects Not yet answered through changes in the real interest rate and affectsthrough changes in the Points out of 1.0...
Question 100In an open economy with flexible exchange rates, monetary policy affects Not yet answered through changes in the real interest rate and affectsthrough changes in the Points out of 1.00 exchange rate. r Remove flag Select one: A. Consumption and investment; net exports O B. net exports; taxes and saving o c. productivity and growth; consumption O D. taxes and saving; net exports
Question 100In an open economy with flexible exchange rates, monetary policy affects Not yet answered through...
The government of Pangea, a small open economy with a flexible exchange rate, has increased government spending by $20 billion. Economists argue that after the crowding-out effect on investment and the crowding-out effect on net exports, the increases in government spending will not affect aggregate demand. Arrange each statement in the proper sequence of events from first to last, to illustrate the reasoning behind this argument. First reduction in net exports due to the appreciation of the domestic currency increased...
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the world consists of a small open economy (we call this domestic) and the rest of the world (we call this foreign). Answer the following questions with the aid of figures where appropriate a. How does an increase in domestic government expenditure affect trade balance and real exchange rate? (2 points] b. How does an increase in foreign government expenditure affect the trade balance and...
II. Consider an open economy with flexible exchange rates. Suppose output is at the natural level, but there is a trade deficit. The goal of policy is to reduce the trade deficit and leave the level of output at its natural level. What is the appropriate fiscal and monetary policy mix?
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...
V. Consider an open economy in which the real exchange rate is fixed and equal to one. Consumption, investment, government spending, and taxes are given by C= 10 + 0.8(Y-T), l = 10, G = 10, and T= 10 Imports and exports are given by where Y" denotes foreign output. ECON 105B a. Solve for equilibrium output in the domestic economy, given Y". What is the multiplier in this economy? If we were to close the economy-so exports and imports...
V. Consider an open economy in which the real exchange rate is fixed and equal to one. Consumption, investment, government spending, and taxes are given by С 10 + 0.8(Y-T), l 10, G-, 10, and T-10 Imports and exports are given by IM 0.3Y and X 0.3Y where Y" denotes foreign output. ECON 10SB Solve for equilibrium output in the domestic economy, given Y. What is the multiplier in this economy? If we were to close the economy-so exports and...
Consider the following open economy. The real exchange rate is fixed and equal to one. Consumption, investment, government spending and taxes are given by: C = co + ci(Y-T), I = 7, G=G, and T=1 Imports and exports are given by: Q = my and X = rY* where asterisk denotes a foreign variable. a) Solve for equilibrium income in the domestic economy, given Y*. What is the multiplier in this economy? If we were to close the economy (so...
Question 100In an open economy with flexible exchange rates, monetary policy affects Not yet answered through changes in the real interest rate and affectsthrough changes in the Points out of 1.00 exchange rate. r Remove flag Select one: A. Consumption and investment; net exports O B. net exports; taxes and saving o c. productivity and growth; consumption O D. taxes and saving; net exports
Question 100In an open economy with flexible exchange rates, monetary policy affects Not yet answered through...
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