When the Marshall-Lerner condition does not hold, does a country’s current account deficit improves or worsens with a depreciation of the currency?
If marshell learner condition do not hold then a currency which is depreciated then it's current account deficit worsense because imports will become more expensive and exports will become cheaper so that we will receive less foreign currency
Marshall learner condition states that when currency depreciates demand for imports will decrease and exports will increase when elasticity of demand is greater than 1
If marshell learner condition do not hold then a currency which is depreciated then it's current account deficit worsense because imports will become more expensive and exports will become cheaper so that we will receive less foreign currency
Marshall learner condition states that when currency depreciates demand for imports will decrease and exports will increase when elasticity of demand is greater than 1
When the Marshall-Lerner condition does not hold, does a country’s current account deficit improves or worsens...
Define the Marshall-Lerner condition. What are the likely effects of devaluation during a recession when supply elasticities are high?
Suppose a country has a current account surplus of $8 billion, but a financial account deficit of $5 billion. a) Is its balance of payments a deficit, surplus or neither? The balance of payments is (select one). b) What change in official exchange reserves would you see? Note: Keep $0 for the second part if you think there is no change. The official exchange reserves would (select one) by $0 billion. c) Is the central bank buying or selling foreign...
Suppose there is a real depreciation. This real depreciation is more likely to cause an increase in net exports when: A. domestic output is relatively low. B. foreign output is relatively high. C. the Marshall-Lerner condition does not hold. D. imports are not at all sensitive to price changes. E. exports are very sensitive to price changes.
If a country has a current account deficit what does this imply about the closed economy real interest rate relative to the world interest rate. Use a Meltzer diagram to illustrate.
a) Make a chart of the U.S. current account deficit, both in absolute $ value and as a share of GDP from 1990 to present. Find the most recent estimate of the U.S. current account deficit for the next two quarters (Note: depending on the availability of actual data. If actual data is available up to the third quarter of 2016, you should look for the estimate for 2016Q4 and 2017Q1). b) For the same sample period (1990-present), chart the...
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? Only with increasing output Only with increasing the current account balance No, not with either goal Yes, with both goals In the short run, if taxes rise, output will_and the exchange rate will increase; appreciate increase; depreciate decrease; appreciate decrease; depreciate With a fixed...
1) How would you characterize US trade policy since the Great Depression of the 1930s? Reinforce your argument with concrete examples of US trade policy. 2) GATT and its successor, the World Trade Organization, have established a set of rules for the commercial conduct of trading nations. Explain. 3) Discuss the economic-integration project known as the European Union in its different stages. Briefly characterize why we have come to refer to the EU as “multi-speed Europe.” 4) Discuss the key...
Suppose that a certain country has a current account surplus in its balance of payments. Does this mean that the country will necessarily have a financial account deficit? Explain why or why not.
Briefly describe the current International Monetary System. How does the Current systems differ from the system that was in place prior to August 1971? Prior to 1971, the world operated on a fixed exchange rate system. The value of the U. S. Dollar link to gold at the fixed price of $35 per ounce and the values of other currencies then tied to the dollar. For example, in 1964, the British pound was fixed at $2.80 for 1 pound, with...
For each of the following transactions, determine which U.S. account will be credited. a. The United States imports $100 million in clothing from China. China receives a financial payment. Capital account Financial account Current account b. British investors purchase $50 million in U.S. stocks and bonds for retirement accounts. Financial account Capital account Current account c. The United States exports $250 million in agricultural products to various nations, receiving a financial payment in return. Capital account Financial account Current account...