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- Consider the following economy:- Mariginal propensity to save = 0.2 Mariginal propensity to import = 0.2 Investment = $500 Governement spending = $300 Taxes = $ 200 Exports = $400 Autonomous import spending = $100 Given this information, beginning at the intial equilibirum output, suppose instead that exports rise by 50. What is the change in current account balance? A: -$25 B: $45 C: -$75 D: $35 E - None of the aboveQ3-19 The IS/LM/BP analysis suggests that, if the BP curve is flatter than the LM curve and the exchange rate is flexible, expansionary fiscal policy will lead to _______ of the country's currency.This will make the fiscal policy _______ effective in influencing national income than if the country had a fixed exchange rate. Select one: a. a depreciation / more b. a depreciation / less c. an appreciation / more d. an appreciation / lessConsider the following economy:- Mariginal propensity to save = 0.2 Mariginal propensity to import = 0.2 Investment = $500 Governement spending = $300 Taxes = $ 200 Exports = $400 Autonomous import spending = $100 Given this information, if governemnt spending falls by $50, what is the change in current account balance? A: -$35 B: -$15 C: -$75 D: $35 E - None of the above
- Kenya and Venezuela are major trading partners and the exchange rate between the Kenyan shilling and the Venezuelan bolivar is determined in a flexible foreign exchange market. A. Assume real income increased in Venezuela. Draw a correctly labeled graph of the foreign exchange market for the shilling and show the effect of increased real income in Venezuela on the equilibrium exchange rate for the shilling. B. Will each of the following increase, decrease, or remain the same as a result of the increase in Venezuelan real income? i. Kenya's net exports. Explain. ii. Unemployment in Kenya. Explain. iii. Kenya's long run aggregate supply. C. Assume instead household savings increase in Venezuela. Draw a correctly labeled graph of the loanable funds market in Venezuela and show the effect of the increase in household savings on the equilibrium real interest rate. D. Based on the change in the equilibrium real interest rate identified in Part C, what will happen to…Kenya and Venezuela are major trading partners and the exchange rate between the Kenyan shilling and the Venezuelan bolivar is determined in a flexible foreign exchange market. A. Assume real income increased in Venezuela. Draw a correctly labeled graph of the foreign exchange market for the shilling and show the effect of increased real income in Venezuela on the equilibrium exchange rate for the shilling. B. Will each of the following increase, decrease, or remain the same as a result of the increase in Venezuelan real income? i. Kenya's net exports. Explain. ii. Unemployment in Kenya. Explain. iii. Kenya's long run aggregate supply. C. Assume instead household savings increase in Venezuela. Draw a correctly labeled graph of the loanable funds market in Venezuela and show the effect of the increase in household savings on the equilibrium real interest rate. D. Based on the change in the equilibrium real interest rate identified in Part C, what will happen to…Based on the table below, which of the following is likely to be true? a. From the first period to the second, the U.S. is using an increasing current account surplus to finance consumption. b. From the first period to the second, the U.S. is using an increasing financial account surplus to finance the larger budget deficit. c. From the first period to the second, public saving is increasing. d. From the first period to the second, the U.S. financial account deficit is increasing.
- QUESTION 10Suppose there are two countries that are identical in every way with the following exception. Country A is pursuing a fixed exchange rate regime and country B is pursuing a flexible exchange rate regime. Suppose government spending in both countries rises by the same amount. Given this information, we know that: the change in output in A will be greater than in B. the change in output in B will be greater than in A. the change in output will be the same in both countries. the relative output effects are ambiguous.2. Graphically show the impact of the following on the real exchange rate and the trade balance (a) Biden's administration passes large spending bill (b) World governments engages in expansionary fiscal policy.8. In a small open economy, net exports NX depend negatively on domestic in- come Y and negatively on the real exchange rate & = = eP/P*, where e is the nom- inal exchange rate (the foreign-currency price of domestic currency), and P and P* are the domestic- and foreign-currency prices of domestically and foreign- produced goods, respectively. Assume initially that both P and P* are fixed. There is perfect mobility of capital, so balance-of-payments equilibrium requires that i i*, where i and it are the domestic and foreign interest rates. Assume the economy adopts a flexible exchange rate regime. = (a) Using the IS-LM-BP model, carefully explain whether monetary policy and/or fiscal policy can succeed in raising the economy's GDP. Now assume instead that the economy adopts a fixed exchange rate regime. (b) For each of the policies below, explain what foreign-exchange market intervention is required to support the fixed exchange rate, and whether the policy would succeed in raising…
- C= C0 + cYD YD = Y I = I0 - br NX = N0 - n1Y + n2Yf + n3R M/P = M0 + m0Y - m1.r where AD = C + I + G0 + NX. What is the impact of M0 and G0 on the equilibrium value of R. That is, discuss the role ofmonetary policy and fiscal policy on the real exchange rate.2. Assume that the current dollar-Euro exchange rate (Ese) is equal to 1, the real exchange rate (qus/Eur) = 1.33, the price level (P) equals 1.5 in the U.S. and 2 in Europe. Assume that relative PPP holds. a. If inflation is 4% in the U.S. but 2% in Europe, what will be the price levels in the U.S. and Europe a year from now? b. What will the nominal exchange rate (Ese) be a year from now? c. What will the real exchange rate (qus/Eur) be a year from now?For a given real exchange rate how are a country s For a given real exchange rate, how are a country’s net exports affected by an increase in domestic income? an increase in foreign income? How does an increase in the domestic real interest rate affect the real exchange rate and net exports? Explain. For a given real exchange rate how are a country s
