Domestic Saving, Supply Demand Supply Demand ReadSpeaker 10 20 30 40 50 QUANTITY OF LOANABLE FUNDS As än open economy, this change in interest rate causes the net capital which in turn causes Ouvert's net The increase in deficit causes the interest rate in Ouvert to inflow to Ouvert to . This change in net capital inflow causes Ouvert's currency to exports to the impact on aggregate demand of the expansionary fiscal policy. The change in net exports caused by the tax cut 422 PM 90F AQI 107 7/25/2021 REAL INTEREST RATE 3)

answer this 2&6

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

Explain how current account and budget deficit (twin deficit) are related so that changes in one are reflected in changes in the other .Explain.

Over the past two years the world has been dealing with the global pandemic. To keep theeconomy going, the government of Jamaica increased their level of government spending.a. Using the IS-LM model, explain the impact of the increased government spending on interestand income.b. Discuss THREE positive impacts that borrowing to finance government spending could haveon a Caribbean country of your choice.

.  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.

3

The Treasury notes that "A prolonged conflict will increase the risks associated with the negative terms of trade and confidence shocks for these [overseas] countries". Given the uncertainty in overseas markets, and its potential for a negative impact on the domestic Australian economy, explain how an expansionary fiscal policy might assist the government smooth the economy. Discuss and illustrate expansionary fiscal policy will have on the Australian dollar's exchange rate with other currencies, and whether this will help or hinder efforts to smooth the economy.

Find the value of revenue deficit if the revenue receipts are $8 and revenue expenditure are $10?

Imagine an economy in which Ricardian equivalence holds. This economy has a budget deficit of 50, a trade deficit of 20, private savings of 130, and investment of 100. If the budget deficit rises to 70, how are the other terms in the national saving and investment identity affected?