Q9. Suppose that Malaysians decide to increase their saving. a) If the elasticity of Malaysian net capital outflow with respect to the real interest rate is very high, will this increase in private saving have a large or small effect on Malaysian domestic investment? b) If the elasticity of Malaysian exports with respect the real exchange rate is very low, will this increase in private saving have a large or small effect on the Malaysian real exchange rate?

Suppose purchasing power parity is true. What happens to the nominal exchange rate if the price of domestically produced goods (in terms of domestic currency) rises? What happens to the real exchange rate?

Consider a world with only two countries (i.e., two large open economies), the home country and the foreign country. In the home country the following relationships hold: { refer to image } b) Suppose that in the home country the desired investment increases by 100, that is, I^d = 400−100r^w. What is the world equilibrium interest rate? What are the equilibrium values of consumption, national saving, investment, and the current account balance in each country?

An explosion of education levels causes Europeans' incomes to increase. How would this event impact the foreign exchange market for Euros? the dollar price of Euros decreases and the quantity of Euros increases the dollar price of Euros decreases and the quantity of Euros decreases the dollar price of Euros increases and the quantity of Euros increases the dollar price of Euros increases and the quantity of Euros decreases

Assume that a small open economy with a fixed exchange rate is given by:   LM curve is given by: Y = 700 r – 250 + 2(M/P) IS curve is given by:   Y = 400 + 3G – 2T + 3NX – 300 r Function for the net exports is:   NX = 550 – 100 e    (where e is the exchange rate) Price level is fixed at 1 World interest rate is r* = 2 Exchange rate is initially = 3   If M = 200, G = 350, and T = 200, solve for:   a. The equilibrium short-run value of Y =   b. The equilibrium short-run value of NX =

Consider the following open economy. The real exchange rate is fixed and equal to one. Consumption, investment, government spending, and taxes are given by:C = 8 + 0.6(Y - T), I = G = T = 0.Imports/ exports are given by:Q = 0.4Y, X = 0.4Y*,where an asterisk denotes a foreign variable a. Suppose that the domestic country takes foreign income Y* as given. The equilibrium output in the domestic economy is? b. Following a), if the domestic government increases spending by 6 units (i.e., G increases from 0 to 6), the equilibrium output in the domestic country will increase by ____. and the trade balance will ________ (increase/decrease) by _____. c. Assume the foreign economy has the same equations as the domestic economy. Both governments consider the impact of the other country on the domestic economy. If G=0, then the equilibrium output in both countries is ______ and the trade balance is ______. d. Following c), if the domestic government increases spending by 6 units as in b) and G=0…

Country A’s goods have become relatively less expensive for Country B’s buyers due to a change in the exchange rate between those two country’s currencies. All other things remaining constant, this could be because Country B’s currency has __________ relative to Country A’s currency. a) shifted b) appreciated c) stagnated d) depreciated

Explain the impact of a sudden appreciation in a country's currency exchange rate on its export-oriented industries and overall economic growth.

In a small open economy, output (gross domestic product) is $30 billion, government purchases are $6 billion, and net factor payments from abroad are zero. Desired consumption and desired investment are related to the world real interest rate in the following manner: TE World Real Desired Desired National Net Interest Rate Consumption Investment Saving Exports 5% $10 billion $8 billion $ billion $ billion 4% $11 billion $9 billion billion 2$ billion 3% $12 billion $10 billion billion billion 2% $13 billion $11 billion 2$ billion $ billion For each value of the world real interest rate, find the value for national saving and net exports. Calculate net exports as the difference between output and absorption. %24 %24 %24 %24

Country Z exports $5 million of goods and services and imports $5 million of goods and services. It also has $10 million of foreign currency denominated foreign assets and $5 million of local currency denominated foreign liabilities both of which earn a fixed 5% return in their respective currencies.If the price elasticity of exports is 0.5 and the elasticity of imports is (-)0.4 what will happen to the current account if the exchange rate depreciates by 1%?   Question 1Select one: a. it is unchanged b. improves by $0.005 million c.   improves by $0.045 million   d.   improves by $0.055 million   e.   worsens by $0.005 million