Homework Answers
Starting from a small open economy with balanced trade , if large foreign countries increase their domestic government purchases , this policy will tend to depreciate the domestic currency and therefore tend to increase exports by the small open economy. Hence, option(C) is correct.
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31. Starting from a small open economy with balanced trade, if large foreign countries increase their domestic gover...
12. In a small open economy, starting from a position of balanced trade, if the government...
12. In a small open economy, starting from a position of balanced trade, if the government increases domestic government purchases, this produces a tendency toward a trade _and net capital outflow. A) deficit; negative B) surplus; positive C) deficit; positive D) surplus; negative
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...
5. Gotham is a small open economy. Suppose that a large number of foreign countries begin...
5. Gotham is a small open economy. Suppose that a large number of foreign countries begin to subsidize investment by instituting an investment tax credit (while adjusting other taxes to hold their tax revenue constant), but Gotham does not institute such an investment subsidy. a) What happens to world investment demand as a function of the world interest rate? b) What happens to the world interest rate? c) What happens to investment in Gotham? d) What happens to Gotham's trade...
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...
37. In a small open economy, if domestic saving exceeds domestic investment, then the extra saving...
37. In a small open economy, if domestic saving exceeds domestic investment, then the extra saving will be used to: A) make loans to the government. B) make loans to foreigners. C repay the national debt. D) repay loans to the Bank of Canada.
IV. Suppose there is an increase in foreign output. a. Show the effect on the domestic...
IV. Suppose there is an increase in foreign output. a. Show the effect on the domestic economy using a two panel diagram that illustrates equilibrium output and net exports. What is the effect on domestic output? On domestic net exports? b. If the interest rate remains constant, what will happen to domestic investment? If taxes are fixed, what will happen to the domestic budget deficit? c. What must happen to private saving? Explain. d. Foreign output does not appear in...
IV. Suppose there is an increase in foreign output. a. Show the effect on the domestic...
IV. Suppose there is an increase in foreign output. a. Show the effect on the domestic economy using a two panel diagram that illustrates equilibrium output and net exports. What is the effect on domestic output? On domestic net exports? b. If the interest rate remains constant, what will happen to domestic investment? If taxes are fixed, what will happen to the domestic budget deficit? c. What must happen to private saving? Explain. d. Foreign output does not appear in...
IV. Suppose there is an increase in foreign output. a. Show the effect on the domestic...
IV. Suppose there is an increase in foreign output. a. Show the effect on the domestic economy using a two panel diagram that illustrates equilibrium output and net exports. What is the effect on domestic output? On domestic net exports? b. If the interest rate remains constant, what will happen to domestic investment? If taxes are fixed, what will happen to the domestic budget deficit? c. What must happen to private saving? Explain. d. Foreign output does not appear in...
Which of the following would have the greatest positive impact on a country's domestic economy? A....
Which of the following would have the greatest positive impact on a country's domestic economy? A. An increase in spending on imports from other countries. B. An increase in spending by foreigners on the country's exports C A decrease in the confidence of foreign investors in the country's economy D A decrease in the incomes of consumers in foreign countries.
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?
12. In a small open economy, starting from a position of balanced trade, if the government increases domestic government purchases, this produces a tendency toward a trade _and net capital outflow. A) deficit; negative B) surplus; positive C) deficit; positive D) surplus; negative
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...
5. Gotham is a small open economy. Suppose that a large number of foreign countries begin to subsidize investment by instituting an investment tax credit (while adjusting other taxes to hold their tax revenue constant), but Gotham does not institute such an investment subsidy. a) What happens to world investment demand as a function of the world interest rate? b) What happens to the world interest rate? c) What happens to investment in Gotham? d) What happens to Gotham's trade...
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...
37. In a small open economy, if domestic saving exceeds domestic investment, then the extra saving will be used to: A) make loans to the government. B) make loans to foreigners. C repay the national debt. D) repay loans to the Bank of Canada.
IV. Suppose there is an increase in foreign output. a. Show the effect on the domestic economy using a two panel diagram that illustrates equilibrium output and net exports. What is the effect on domestic output? On domestic net exports? b. If the interest rate remains constant, what will happen to domestic investment? If taxes are fixed, what will happen to the domestic budget deficit? c. What must happen to private saving? Explain. d. Foreign output does not appear in...
IV. Suppose there is an increase in foreign output. a. Show the effect on the domestic economy using a two panel diagram that illustrates equilibrium output and net exports. What is the effect on domestic output? On domestic net exports? b. If the interest rate remains constant, what will happen to domestic investment? If taxes are fixed, what will happen to the domestic budget deficit? c. What must happen to private saving? Explain. d. Foreign output does not appear in...
IV. Suppose there is an increase in foreign output. a. Show the effect on the domestic economy using a two panel diagram that illustrates equilibrium output and net exports. What is the effect on domestic output? On domestic net exports? b. If the interest rate remains constant, what will happen to domestic investment? If taxes are fixed, what will happen to the domestic budget deficit? c. What must happen to private saving? Explain. d. Foreign output does not appear in...
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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