1. Use the model of the small open economy to examine the effects of the following on saving, investment, the trade bala...
1. Use the model of the small open economy to examine the effects of the following on saving, investment, the trade balance, the interest rate under the following scenarios?
(a) Increase in taxes abroad
(b) Increase in taxes at home
Homework Answers
a)
Increase in taxes abroad would reduce world rate of interest. Thus, there will be inflow of fund, it will appreciate domestic currency and net export will fall. domestic interest rate will fall as well.
Following is diagram:
World rate of interest falls from iw to iw1. So domestic investment will rise.
Net Export = S -I
b)
Increase in tax at home will reduce the demand for investment and interest rate will fall. Following is diagram:
Increase taxes reduces saving and push up interest rate. So there will be rise in value of currency.
Add Answer to:
1. Use the model of the small open economy to examine the effects of the following on saving, investment, the trade bala...
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?
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?
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)....
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)....
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?
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...
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.
China is a large open economy with an extraordinarily high saving rate. If, as seems likely,...
China is a large open economy with an extraordinarily high saving rate. If, as seems likely, there is a decrease in desired saving in the coming years, what effects should we expect to see on China's trade balance (net capital flow), domestic real interest rate, and actual levels of saving and investment?
1.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment....
1.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment. Using the classical open economy model from chapter 6, what will the effects of this investment tax exemption? Suppose a government decides to increase taxes. 2.Using the long-run model of the economy developed in Chapter 3(national income), graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium...
1.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment....
1.Suppose the government of a small open economy passes an investment tax exemption to stimulate investment. Using the classical open economy model from chapter 6, what will the effects of this investment tax exemption? Suppose a government decides to increase taxes. 2.Using the long-run model of the economy developed in Chapter 3(national income), graphically illustrate the impact of on GDP. Be sure to label the axes, the curves, the initial equilibrium values, the direction curves shift, and the terminal equilibrium...
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?
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...
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.
Most questions answered within 3 hours.
-
2) Write a C++ program that uses a class called “Degree” to
obtain the trigonometric
values...
asked 25 minutes ago -
1. In eukaryotic cells the genomes of
&
asked 24 minutes ago -
The standard enthalpy of propanol (C3H7OH) is -303.0 kJ/mol.
Compute both of the
gross and net...
asked 24 minutes ago -
Why PWM using H-bridge for control motor speed is more power
effiecient than the linear amplifier...
asked 38 minutes ago -
In 1999, Carly Fiorina famously said,"I hope that we are at a
point that everyone is...
asked 41 minutes ago -
Individuals in a species of moth vary in wing color from white to
black, but all...
asked 54 minutes ago -
The following standards for variable manufacturing overhead have
been established for a company that makes only...
asked 1 hour ago -
The United States government wanted to determine what proportion
of Americans approve of the current president,...
asked 1 hour ago -
2-N stone is dropped from the top of a cliff. The stone hits the
ground 3...
asked 1 hour ago -
Vitamins participate in metabolic reactions in their coenzyme
forms . Match the following reactions to the respective...
asked 1 hour ago -
We have developed a new mobile device and wish to gain insight
into the price that...
asked 1 hour ago -
12.8 ml of a solution is run into an empty flask, from a buret.
The mass...
asked 1 hour ago