Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. The exchange rate between the Australian dollar and the Indian rupee is determined in a flexible foreign exchange market. a. Assume India is currently in recession. What fiscal policy action could the Indian government take to eliminate the recession? b. What would be the effect of the fiscal policy action identified in part (a) on interest rates in India? c. Draw a correctly labeled graph of the foreign exchange market for the Australian dollar. Show on your graph the impact of the change in interest rates identified in part (b) on each of the following. i. The supply of Australian dollars ii. The equilibrium exchange rate of the Australian dollar d. What would be the effect of the change in the exchange rate identified in part (c)(ii) on Australian exports? e. What would be the effect of the change in Australian exports identified in part (d) on Australian unemployment?

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. The exchange rate between the Australian dollar and the Indian rupee is determined in a flexible foreign exchange market. a. Assume India is currently in recession. What fiscal policy action could the Indian government take to eliminate the recession? b. What would be the effect of the fiscal policy action identified in part (a) on interest rates in India? c. Draw a correctly labeled graph of the foreign exchange market for the Australian dollar. Show on your graph the impact of the change in interest rates identified in part (b) on each of the following. i. The supply of Australian dollars ii. The equilibrium exchange rate of the Australian dollar d. What would be the effect of the change in the exchange rate identified in part (c)(ii) on Australian exports? e. What would be the effect of the change in Australian exports identified in part (d) on Australian unemployment?

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter19: The International Monetary System: Order Or Disorder

Section: Chapter Questions

Problem 4DQ

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