he UK has been running large trade account deficits for many years. According to the e rade deficit is found to be correlated with O significant rise in public savings but fall in private savings O significant rise in private savings but fall in public savings O significant deterioration in both the private and public savings for many years O significant rise in investment

he UK has been running large trade account deficits for many years. According to the e rade deficit is found to be correlated with O significant rise in public savings but fall in private savings O significant rise in private savings but fall in public savings O significant deterioration in both the private and public savings for many years O significant rise in investment

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Use the interactive graph of the foreign exchange market for Canadian dollars to illustrate the impact a net capital outflow will have on the dollar's real exchange rate. Calculate the size of the net capital outflow that results in the Canadian loanable funds market. net capital outflow: $ After the change in loanable funds, the real exchange rate appreciates. stays the same. depreciates. Real exchange rate 3 2 1 O 0 Supply of dollars Demand for dollars 100 200 300 400 500 600 700 800 900 1,000 Quantity of Canadian dollars
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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Give the answer of both.
8:12 O YTB Output, Y Output, Y 3 A' ZZ' B Trade deficit NX ZZ • Summary: - An increase in domestic demand leads to an increase in domestic output but leads also to a deterioration of the trade balance. An increase in foreign demand leads to an increase in domestic output and an improvement in the trade balance. Implications: - Shocks to demand in one country affect all other countries. Economic interactions complicate the task of policy makers. Policy coordination is not so easy to achieve. 1 Q 4 ...
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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.
Analyze the adjustment of the dollar/euro exchange rate following a permanent increase inthe U.S. money supply. In your analysis show both the short-run and the long-run effects ofthis disturbance. Suppose that the economy starts with all variables at their long-run levelsand that output remains constant as the economy adjusts to the money supply change. Alsoassume that the decrease in the money supply affects exchange rate expectations today. Please illiustrate any graph if needed. Thank you
If the United States had a capital and financial account deficit of $50 billion, we could say the United States had Please choose one: O a net imports of $50 billion O b.a current account deficit of $50 billion O c net foreign borrowing of $50 billion OD. acquired net foreign assets of $50 billion.
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
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