a. The major economic functions of the interest rate areO to provide market incentives for saving and to encourage international capital flows.O to influence investment and domestic output and to provide market incentives for saving.O to provide market incentives for saving and to allocate money capital to its most productive uses.O to influence investment and domestic output and to allocate money capital to its most productive uses.b. Many businesses finance their investment activities internally. Should internal financing affect the efficiency with which the interestrate performs its functions?O No, because internal financing relies on a different profit calculation.O Yes, because firms are usually more anxious about what happens to money that they do not have to pay back.O No, investment is profitable if the expected rate of return is greater than the rate of interest regardless of the source of funds.O Yes, investment is profitable if the expected rate of return is greater than the rate of interest regardless of the source of funds.

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Answered: a. The major economic functions of the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 8 of 20 Current account transactions are records of the incomes and expenditures from exports and imports, plus international financial investments and borrowing. O a. True O b. False home + ) O Icon Key R 5 B 6 Y H & 7 N * 8 M ( 9 K O L P
31. The __________ exchange rate is a weighted average of the market rates across a number of foreign currencies. a. Nominal bilateral b. Real bilateral c. Nominal effective d. Real effective 32. The __________ exchange rate incorporates both the market exchange rate and the product price levels for two countries. a. Nominal bilateral b. Real bilateral c. Nominal effective d. Real effective 33. The __________ exchange rate is a weighted average of the real bilateral exchange rates across a number of foreign countries. a. Nominal bilateral b. Real unilateral c. Nominal effective d. Real effective 34. Studies of exchange rate prediction models conclude that: a. Structural economic models cannot reliably out predict the naÃ¯ve alternative of a random walk for short forecast horizons. b. Structural economic models reliably out predict the naÃ¯ve alternative of a random walk for short forecast horizons. c. Structural economic models cannot out predict the…
. The government has proposed Rs1,289 billion for the defence budget for the year 2020-21, 5.1% more compared to last year’s revised defence estimates of Rs1,227 billion for the year 2019-20. If Government cut defence Budget, what happens to saving, investment, the trade balance, the interest rate, inflation rate and the exchange rate? And similarly, Government decreases the interest rate due to COVID-19 so explain what impact on consumption, investment and interest rate. Justify the answer with your own word and examples.
2. Under what circumstances might an increase in worldwide interest rates be beneficial for a small open economy (SOE)? Explain.
5
1. The government of country X is committed to fighting corruption and providing tax holidays for the investor to improve the business climate and reduce asset risk. These policies will …. increase both country's net exports and net capital outflows increase country's net exports but decrease country's net capital outflows decrease both net exports and net capital outflows decrease country's net exports but increase country's net capital outflows 2. Suppose that the Indonesia government went from a budget deficit to a budget surplus, then …. the interest rate and the real exchange rate would increase, while net capital outflow would decrease the interest rate and the real exchange rate would decrease, while net capital outflow would increase the interest rate would increase, while both the real exchange rate and net capital outflow would decrease the interest rate would decrease, while both the real exchange rate and net capital outflow would increase 3. When the real exchange…
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…
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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.
Consider a small economy that does not permit international borrowing or lending. The country's autarky real interest rate is greater than the world real interest rate. Now suppose the economy removed capital controls. Which of the following is true? There is an excess supply of capital in the domestic economy and capital flows in O There is an excess demand for capital in the domestic economy and capital flows out There is an excess demand for capital in the domestic economy and capital flows in O There is an excess supply of capital in the domestic economy and capital flows out
QUESTION 8 Suppose the development of the European Union leads to a greater demand for investment in Europe. You'd expect OA, a recession in Europe. B. a decline in the world real interest rate. OC, a rise in the current account in Europe. D. an increase in the world real interest rate.
Suppose a country experiences symptoms of the Dutch Disease. Which of the following policies could help to protect the economy? O Discouraging high rates of saving O Helping particular companies or industries

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