Homework Answers
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A large number of foreign countries invested in Gotham, the small open economy for achieving tax benefit.
a) World investment demand will be affected as many countries subsidise investment i.e.making investment only for getting tax benefit. Due to this, world interest rate will also decline as investments are not become for productive purposes.
b) World interest rate will also decrease as investments are not in proper market.
c) When all investment are taken over by foreign countries then there will be crisis for domestic investments and due to which production activities also curtailed and economic growth rate also will also be reduced.
d) Gotham's trade balance will become unfavorable as domestic movements will become restricted and there is also results deficit in trade balance.
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5. Gotham is a small open economy. Suppose that a large number of foreign countries begin...
7. Assume that some large foreign countries begin to subsidize investment by instituting an investment tax credit. T...
7. Assume that some large foreign countries begin to subsidize investment by instituting an investment tax credit. Then, if world saving does not depend on the interest rate, world investment: A) will rise and small country investment will fall. B) will rise and small country investment will remain unchanged. C) will remain unchanged and small country investment will fall. D) and small country investment will both remain unchanged.
31. Starting from a small open economy with balanced trade, if large foreign countries increase their domestic gover...
31. Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase: A) investment in the small open economy. B) saving in the small open economy. C) exports by the small open economy. D) imports by the small open economy.
Consider two large open economies, the home economy and the foreign economy. In both countries th...
Can someone please explain?
Consider two large open economies, the home economy and the foreign economy. In both countries the following relationships hold Domestic Foreign Desired consumption, Cd-320 + 0.4(Y-T)-200rw. Desired investment, 150 200* Output, Y = 1.000 Taxes, T 200 Government purchases. G 275 Fr4800.4(YFr To 300r. For 225 300 For1,500 For-300 For 300 a. What is the equilibrium interest rate in the international capital market?(Enter your response as a decimal rounded to three places.) What are the equilibrium...
26. Assume that some large foreign countries decide to subsidize investment by instituting an investment tax credit....
26. Assume that some large foreign countries decide to subsidize investment by instituting an investment tax credit. Then a small country's real exchange rate: A) will fall and its net exports will rise. B) will rise and its net exports will fall. C) and net exports will both fall. D) and exports will both rise.
7. Consider Two large open economics, the home economy and the foreign economy. In the home count...
7. Consider Two large open economics, the home economy and the foreign economy. In the home country the following relationships hold: desired consumption, Cd = 420+0.4(Y-T)-200rw desired investment, Id =250-200rw output, Y =1000 TAXES, t = 200 Government purchases, G =275 In the foreign country the following relationships hold: Desired consumption, Cdfor = 480+0.4(Yfor-Tfor)-300rw Desired investment, Idfor=225-300rw Output, Yfor = 1500 Taxes, T for =300 Government purchase, G for =300 What is the equilibrium interest rate in the international capital...
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...
If a small open economy cuts defense spending, what happens to saving, investment, the trade balance,...
If a small open economy cuts defense spending, what happens to saving, investment, the trade balance, the interest rate, and the exchange rate?
8) In the small open economy in the long run model, Savings is A) dependent on...
8) In the small open economy in the long run model, Savings is A) dependent on the real interest rate B) influenced by Tariffs. C) independent of the real interest rate D) determined by Liquidity Preferences 9) In the small open economy, the real interest rate increases when: A) net exports increase. B) expected inflation increases C) a large foreign country cuts taxes. D) net export decreases. 10) The inflation rate will increase when all the following happens except: A)...
2. Consider a large open domestic economy with a financial account surplus. i. Draw a diagram sho...
2. Consider a large open domestic economy with a financial account surplus. i. Draw a diagram showing this situation (Your answer should include two graphs, one for the omestic economy and one for the foreign economy). (10 Points)- Note: Draw the two graphs side by side and clearly indicate the world interest rate as a single line going through both graphs. ii. What are the effects, in equilibrium, on the world real interest rate, domestic national saving, domestic investment, the...
5. Consider a small open economy that is currently running a trade deficit. a. With the...
5. Consider a small open economy that is currently running a trade deficit. a. With the help of a graph, what would happen to the real interest rate, the trade deficit, and desired levels of saving and investment if government expenditures were to increase? b. With the help of another graph, what would happen to the real interest rate, the trade deficit, and desired levels of saving and investment if consumption expenditures were to decrease?
7. Assume that some large foreign countries begin to subsidize investment by instituting an investment tax credit. Then, if world saving does not depend on the interest rate, world investment: A) will rise and small country investment will fall. B) will rise and small country investment will remain unchanged. C) will remain unchanged and small country investment will fall. D) and small country investment will both remain unchanged.
31. Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase: A) investment in the small open economy. B) saving in the small open economy. C) exports by the small open economy. D) imports by the small open economy.
Can someone please explain?
Consider two large open economies, the home economy and the foreign economy. In both countries the following relationships hold Domestic Foreign Desired consumption, Cd-320 + 0.4(Y-T)-200rw. Desired investment, 150 200* Output, Y = 1.000 Taxes, T 200 Government purchases. G 275 Fr4800.4(YFr To 300r. For 225 300 For1,500 For-300 For 300 a. What is the equilibrium interest rate in the international capital market?(Enter your response as a decimal rounded to three places.) What are the equilibrium...
26. Assume that some large foreign countries decide to subsidize investment by instituting an investment tax credit. Then a small country's real exchange rate: A) will fall and its net exports will rise. B) will rise and its net exports will fall. C) and net exports will both fall. D) and exports will both rise.
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...
2. Consider a large open domestic economy with a financial account surplus. i. Draw a diagram showing this situation (Your answer should include two graphs, one for the omestic economy and one for the foreign economy). (10 Points)- Note: Draw the two graphs side by side and clearly indicate the world interest rate as a single line going through both graphs. ii. What are the effects, in equilibrium, on the world real interest rate, domestic national saving, domestic investment, the...
5. Consider a small open economy that is currently running a trade deficit. a. With the help of a graph, what would happen to the real interest rate, the trade deficit, and desired levels of saving and investment if government expenditures were to increase? b. With the help of another graph, what would happen to the real interest rate, the trade deficit, and desired levels of saving and investment if consumption expenditures were to decrease?
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