Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world. Explain how this increase in interest rates will affect each of the following for the Country X. Investment The international value of its currency Exports
Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world. Explain how this increase in interest rates will affect each of the following for the Country X. Investment The international value of its currency Exports
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter8: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
Problem 14QP
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Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world.
Explain how this increase in interest rates will affect each of the following for the Country X.
- Investment
- The international value of its currency
- Exports
Using a correctly labelled aggregate demand and
-
- Output
- The price level
Identify one fiscal policy action that could counter the effect identified in part (b). Explain how this policy will affect each of the following.
-
- Output
- The price level
- Nominal interest rates
- i. Identify one
monetary policy action that could counter the effects identified in part (b). - ii. Using a correctly labelled
money market graph, show how this policy will affect nominal interest rates.
last 2 questions was not answered 4 and 5 the previous questions was already answered
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