In a small open economy undertaking a fiscal contraction, the real interest rate should: rise fall stay the same move by the same amount as the exchange rate
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6. In a small open economy undertaking a fiscal contraction, the real interest rate should:
- rise
- fall
- stay the same
- move by the same amount as the exchange rate
Step by step
Solved in 2 steps
- If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.What does it mean to say that a currency appreciates? Depreciates? Becomes stronger? Becomes weaker?13. Draw a diagram and illustrate the effects of the follow- ing on the net exports function for the United States: a. The French government imposes restrictions on French imports of U.S. goods. ate my. b. The U.S. national income rises. c. Foreign income falls. d. The dollar depreciates on the foreign exchange market. 60 00 C functiom different. how transcribed image text
- 10. If net foreign investments are -250, what are the net exports? Can you draw any conclusions about the budget deficit?3. How reasonable is it for every country to follow policies aimed at increasing net exports?E1 The higher the value of e, the ______________(More or less) units of foreign currency a dollar buys. When a nominal exchange rate goes up, we say the domestic currency is _________(appreciating or depreciating) against the foreign currency. When a nominal exchange rate goes down, we say that the domestic currency is _________(depreciating or appreciating) against the foreign currency.
- 16. Explain why net exports and the real exchange rate have an inverse relationship. Why do NXs decrease as exchange rates increase? Why do NXs increase as exchange rates decrease? Use graphsSub : EconomicsPls answer very fast.I ll upvote. Thank You a small open economy is described by the following equations: C = 50 + .75(Y-T) I = 200 - 20r NX = 200 -50e M/P = Y -40r G = 200 T = 200 M = 3000 P = 3 r* = 5 a. Derive and graph the IS* and LM* curves. b. Calculate the equilibrium exchange rate, level of income, and net exports c. Assume a floating exchange rate. Calculate what happens to the exchange rate, the level of income, net exports and the money supply if the government increases spending by 50. Use graph to illustrate what you find. d. Now assume fixed exchange rate. Calculate what happens to the exchange rate, the level of income, net exports and the money supply if the government increases spending by 50. Use graph to illustrate what you find.What is happening to the U.S. real exchange rate ineach of the following situations? Explain.a. The U.S. nominal exchange rate is unchanged,but prices rise faster in the United States thanabroad.b. The U.S. nominal exchange rate is unchanged, butprices rise faster abroad than in the United States.c. The U.S. nominal exchange rate declines, andprices are unchanged in the United States andabroad.d. The U.S. nominal exchange rate declines, andprices rise faster abroad than in the United States.
- 1. When calculating gross national disposable income in an open economy, we adjust gross nationalexpenditure by:a. subtracting exports and adding back imports.b. adding in net income earned from foreign sources, plus the trade balance, plus net unilateraltransfers from abroad.c. subtracting depreciation, payroll taxes, and indirect business taxes, while adding in subsidies.d. taking out net factor income from abroad and subtracting net unilateral transfers.g. Use a figure to explain the potential effectiveness of fiscal policy to spur on the economy under a fixed exchange rate. Diagram is given below, to answer this question consult the textbook chapter-7] 1 OUP, Ywhat are two reasons Why is the statstic for fiscal deficits are so closely monitired in small fixed exchange rate economies?
