Use the model of the small open economy (Apply the small open economy model of real...
Use the model of the small open economy (Apply the small open economy model of real exchange rate determination ) to predict what would happen to the trade balance, the real exchange rate, and the nominal exchange rate in response to each of the following events. draw a graph (be sure to label all points, shifts and curves) and provide a short verbal analysis of the impact on the trade balance, the real exchange rate and the nominal exchange rate).
a. The introduction of a stylish line of Toyotas makes some consumers prefer foreign cars over domestic cars
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Use the model of the small open economy (Apply the small
open economy model of real...
40. In the basic model of a small open economy, if consumers shift their preferences toward...
40. In the basic model of a small open economy, if consumers shift their preferences toward foreign cars, then net exports: A) fall and the real exchange rate falls. B) fall but the real exchange rate remains unchanged. C) remain unchanged but the real exchange rate falls. D) and the real exchange rate remain unchanged.
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...
1: what would happen to national saving, investment, trade balance interest rate, and real exchange rate...
1: what would happen to national saving, investment, trade balance interest rate, and real exchange rate in responding to an increase in tariff on imported cars by the domestic government? graphically explain with the help of large open economy 2: what do you mean by trade policies? it's argued that protectionist trade policy benefits only local producers whereas society on the average suffers from it, do you agree with the statement? graphically explain considering a model of small open economy?
Joseph shulunga Name: Chapter 19 How Policies and Events Affect an Open Economy Please use the...
Joseph shulunga Name: Chapter 19 How Policies and Events Affect an Open Economy Please use the three-step process developed in Chapter 4. First, determine which of the curves have been affected. Second, determine in which direction the curves shift, and finally, use the diagrams to examine how these shifts alter equilibrium in the two markets. A. Government Budget Deficits 1. What will happen to supply of LF? 2. Real Interest rate? 3. Real exchange rate?
Panem is a small open economy. Its residents has become more optimistic about their future. What...
Panem is a small open economy. Its residents has become more optimistic about their future. What will happen to Panem’s trade balance and real exchange rate? Explain using your own words and a figure.
Recall the small open economy model we considered, and answer the following questions for a small...
Recall the small open economy model we considered, and answer the following questions for a small open economy named Atlas. For each of the slots labeled (a) through (d), indicate whether the policy listed to the leftmost column causes the variable listed in the upper row to rise, fall, or remain unchanged, and provide an explanation for your answer in each case. (13 pts) Atlas domestic investment (3pts) Contractionary a fiscal in Atlas Atlas net capital outflow (3pts) b Atlas...
22. In a small open economy, if the world interest rate increases, then the supply of domestic currency on the forei...
22. In a small open economy, if the world interest rate increases, then the supply of domestic currency on the foreign exchange market will and the real exchange rate will holding all else constant. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase
In the open-economy macroeconomic model, if the supply of loanable funds shifts right Group of answer...
In the open-economy macroeconomic model, if the supply of loanable funds shifts right Group of answer choices the interest rate falls and the supply of dollars in the market for foreign-currency exchange shifts right. the interest rate falls and the supply of dollars in the market for foreign currency exchange shifts left. the interest rate rises and the demand for dollars in the market for foreign currency exchange shifts right. the interest rate rises and the demand for dollars in...
8. In a small open economy, if the world real interest rate is above the rate...
8. In a small open economy, if the world real interest rate is above the rate at which national saving exceeds domestic investment, then there will be a trade _and net capital outflow. A) surplus; negative B) deficit; positive C) surplus, positive D) deficit; negative
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...
40. In the basic model of a small open economy, if consumers shift their preferences toward foreign cars, then net exports: A) fall and the real exchange rate falls. B) fall but the real exchange rate remains unchanged. C) remain unchanged but the real exchange rate falls. D) and the real exchange rate remain unchanged.
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...
Joseph shulunga Name: Chapter 19 How Policies and Events Affect an Open Economy Please use the three-step process developed in Chapter 4. First, determine which of the curves have been affected. Second, determine in which direction the curves shift, and finally, use the diagrams to examine how these shifts alter equilibrium in the two markets. A. Government Budget Deficits 1. What will happen to supply of LF? 2. Real Interest rate? 3. Real exchange rate?
22. In a small open economy, if the world interest rate increases, then the supply of domestic currency on the foreign exchange market will and the real exchange rate will holding all else constant. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase
8. In a small open economy, if the world real interest rate is above the rate at which national saving exceeds domestic investment, then there will be a trade _and net capital outflow. A) surplus; negative B) deficit; positive C) surplus, positive D) deficit; negative
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...
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