What will happen to the trade balance and the real exchange rate of the US if...
What will happen to the trade balance and the real exchange rate of the US if Congress decreases government purchases to balance the budget? Graph this situation using the open economy model. What happens when countries outside the US implement fiscal austerity to satisfy the IMF?
Homework Answers
The increase in government spending decreases government saving and, thus, decreases national
saving; this shifts the saving schedule to the left.
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What will happen to the trade balance and the real exchange rate
of the US if...
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?
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)....
using a well labelled graph, explain how the real exchange rate between the US and EU...
using a well labelled graph, explain how the real exchange rate between the US and EU is determined in the long-run. also, explain the slopes of the demand and supply curves in your graph. if there is an increase in the relative demand for european goods, what will happen to the real exchange rate?
Question 6. (20 points) Use the Mundell-Fleming model and diagrams to predict what would happen to...
Question 6. (20 points) Use the Mundell-Fleming model and diagrams to predict what would happen to aggregate income, the exchange rate, and the trade balance under both floating and fixed exchange rates in response to each of the following policies in a small open economy. a. (10 points) Government of Canada cuts taxes. b. (10 points) Bank of Canada increases money supply
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?
What would happen to Bolivia’s real exchange rate in each of the following situations? The Bolivian...
What would happen to Bolivia’s real exchange rate in each of the following situations? The Bolivian nominal exchange rate is unchanged. Prices rise faster in other countries than in Bolivi (3 points) The Bolivian nominal exchange rate increases. Prices rise faster in Bolivia than abroad. (3 points)
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?
Assume the exchange rate is defined as f/$. What is the real exchange rate? If there...
Assume the exchange rate is defined as f/$. What is the real exchange rate? If there is and appreciation of the $, what happens to the price of foreign goods measured in dollars and of US goods measured in the foreign currency? What is the effect on US imports and exports and Y. Explain.
Suppose the US economy is at Potential GDP. Then, consumers and firms become pessimistic about future...
Suppose the US economy is at Potential GDP. Then, consumers and firms become pessimistic about future economic conditions, and consumption and investment decrease. In response to the decline in consumption and investment, the FED increases the money supply. Congress responds as well approving an increase in government spending and tax cuts. Illustrate this sequence of events using an Aggregate Demand/Aggregate Supply graph. State what happens with Real GDP, Prices, and the Unemployment rate after monetary and fiscal policies are implemented.
Question 4 Assume that after years of economic recovery, the US economy has reached its natural...
Question 4 Assume that after years of economic recovery, the US economy has reached its natural rate of output. Explain with a diagram how a continuous rise in oil prices affects the price and output levels of the US. Based on your answer in (a), what kind of fiscal policy can be implemented to restore the output level back to its natural rate? Illustrate your answer with a diagram. What will happen to the price and output levels? How does...
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?
Suppose the US economy is at Potential GDP. Then, consumers and firms become pessimistic about future economic conditions, and consumption and investment decrease. In response to the decline in consumption and investment, the FED increases the money supply. Congress responds as well approving an increase in government spending and tax cuts. Illustrate this sequence of events using an Aggregate Demand/Aggregate Supply graph. State what happens with Real GDP, Prices, and the Unemployment rate after monetary and fiscal policies are implemented.
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