What will happen to the trade balance and the real exchange rate of a small open economy when government purchases inc as during a war? Does your answer depend on whether this is a local war or a world war? a. Make the appropriate changes to the graph below to reflect an increase in government purchases for national defense. Real Exchange Rate () 20 18 16 14 12 10 6 World Interest Rate 6 10 12 Net Exports (NX) National Saving less Domestic Investment (S-1) Net Exports, or NX(x) 14 16 18 20 b. For a local war, the increase in government purchases woud cause change in net exports would push the trade balance toward to decrease, and the resulting c. For a world-wide war, world defense spending increases would cause a decline in world saving, which would result in an The impact on the domestic trade balance depends on the sensitivity of increase in to changes in the world interest rate.
What will happen to the trade balance and the real exchange rate of a small open economy when government purchases inc as during a war? Does your answer depend on whether this is a local war or a world war? a. Make the appropriate changes to the graph below to reflect an increase in government purchases for national defense. Real Exchange Rate () 20 18 16 14 12 10 6 World Interest Rate 6 10 12 Net Exports (NX) National Saving less Domestic Investment (S-1) Net Exports, or NX(x) 14 16 18 20 b. For a local war, the increase in government purchases woud cause change in net exports would push the trade balance toward to decrease, and the resulting c. For a world-wide war, world defense spending increases would cause a decline in world saving, which would result in an The impact on the domestic trade balance depends on the sensitivity of increase in to changes in the world interest rate.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter23: The International Trade And Capital Flows
Section: Chapter Questions
Problem 44P: Imagine that the U.S. economy finds itself in the following situation: a government budget deficit...
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