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6. I f exchange rates are fixed and the country experiences a recession, what would the...
suppose we have a country w/ fixed exchange rate regime. the country just experienced a natural...
suppose we have a country w/ fixed exchange rate regime. the country just experienced a natural disaster (SRAS curve shift inward). a) should they devaluate or revaluate their currency to resolve inflation issue? b) what would the country do with its currency?explain and show on graph (w/ exchange rate on y-axis, countries currency in x-axis)
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...
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers...
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...
One year ago, the spot exchange rate between country F and country J was S0=F/J 155.Today,...
One year ago, the spot exchange rate between country F and country J was S0=F/J 155.Today, the spot rate is S1=F/J 160. Inflation over the year was 2% in country J and 3%in country F. a) Did currency J appreciate or depreciate over the year? By how much? b) One year ago, what F/J exchange rate would PPP have predicted for today? c) Was currency J overvalued or undervalued against currency F over the period? By how much? d) Given...
2. If I use the market approach to exchange rate forecasting, which of the following would I use to predict future spot...
2. If I use the market approach to exchange rate forecasting, which of the following would I use to predict future spot rates. a. Past spot rates b. GNP differences between countries c. Forward Rates d. Today’s rate is the expected future rate e. Charting techniques 3. A large government deficit relative to GDP, a high rate of money expansion accompanied by fixed exchange rates, along with substantial government expenditures are some of the common characteristics of _________ risk. a.exchange...
Topic 1. Fundamental Analysis We studied that there are three ways to forecast exchange rates. In...
Topic 1. Fundamental Analysis We studied that there are three ways to forecast exchange rates. In this thread, I would like to discuss fundamental analysis. Some issues to consider: What types of determinants do you think are important in terms of exchange rates? Where could we get measures of those determinants in practice? Are there macroeconomic variables that are more important than others for the determination of exchange rates? Do you think it is harder/easier to forecast fixed or flexible...
Suppose an economy under fixed (pegged) exchange rates is currently facing:
Suppose an economy under fixed (pegged) exchange rates is currently facing:(i) a balanced current account (NX = 0),(ii) a negative output gap (excess unemployment), and(iii) a balanced budget. (a) Using an NX/ (S-I) model depict the above situation in relation to the internal and external balance diagrammatically. (b) Now suppose as an advisor to the government your recommendation is to employ an expenditure-changing policy to attain the Internal Balance. Explain in details what this policy is made up and what the...
Which of the following statements about a country with a fixed exchange rate and perfect capital...
Which of the following statements about a country with a fixed exchange rate and perfect capital mobility is not correct? (a) Shocks to aggregate demand lead to large changes in output. (b) Domestic interest rates must match interest rates in other countries. (c) Inflation targeting works well. (d) Monetary policy cannot be used to stabilize the economy. What of the following statements about the first thing that firms do in response to a fall in demand is correct? (a) Reduce...
Question 6. Efficiency and Exchange (9p) A small country imports heating oil at the price of...
Question 6. Efficiency and Exchange (9p) A small country imports heating oil at the price of 4$ per liter. The government finds that too expensive and wants to lower the price of oil to 2$ per liter through subsidies. The market demand curve for oil is the following: Quantity is in millions. a) Draw the supply curves when price is equal to $4 and then $2 on the same graph. (1p) b) Find the equation for the demand curve (2p)...
15,16 Question Completion Status: QUESTION 15 With a fixed exchange rate, what would be effective stabilization...
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Question Completion Status: QUESTION 15 With a fixed exchange rate, what would be effective stabilization policy during a recession? O Expansionary fiscal policy O Expansionary monetary policy O Contractionary fiscal policy O Contractionary monetary policy QUESTION 16 because it affects a component of aggregate demand. On the DD curve, exchange rate depreciation causes output to A. fall; investment B. fall; the current account o rise; consumption OD. rise; the current account QUESTION 17 shte in tame Inflation. The country's
A country with a floating exchange rate faces a short-run recession and current account deficit. Policymakers want to use temporary expansionary monetary policy to increase both output and the current account balance. Will they be successful? Only with increasing output Only with increasing the current account balance No, not with either goal Yes, with both goals In the short run, if taxes rise, output will_and the exchange rate will increase; appreciate increase; depreciate decrease; appreciate decrease; depreciate With a fixed...
Which of the following statements about a country with a fixed exchange rate and perfect capital mobility is not correct? (a) Shocks to aggregate demand lead to large changes in output. (b) Domestic interest rates must match interest rates in other countries. (c) Inflation targeting works well. (d) Monetary policy cannot be used to stabilize the economy. What of the following statements about the first thing that firms do in response to a fall in demand is correct? (a) Reduce...
Question 6. Efficiency and Exchange (9p) A small country imports heating oil at the price of 4$ per liter. The government finds that too expensive and wants to lower the price of oil to 2$ per liter through subsidies. The market demand curve for oil is the following: Quantity is in millions. a) Draw the supply curves when price is equal to $4 and then $2 on the same graph. (1p) b) Find the equation for the demand curve (2p)...
15,16
Question Completion Status: QUESTION 15 With a fixed exchange rate, what would be effective stabilization policy during a recession? O Expansionary fiscal policy O Expansionary monetary policy O Contractionary fiscal policy O Contractionary monetary policy QUESTION 16 because it affects a component of aggregate demand. On the DD curve, exchange rate depreciation causes output to A. fall; investment B. fall; the current account o rise; consumption OD. rise; the current account QUESTION 17 shte in tame Inflation. The country's
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