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?

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?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

If a Japanese car costs P*=1,000,000 yen, a similar American car costs P= 20,000, and a dollar can buy 100 yen, e= 100 yen/$. Car is assumed to be identical and japan is next door to New Hampshire for simplicity: a. What is the real exchange rate? In which country is car more expensive? b. From which country would you buy and which country would you sell?
If the price level of Turkish goods is 200, the price level of foreign goods is 125, and the lira price of foreign currency is 1.20, what is the real exchange rate? What is the meaning of this rate for the competitiveness of Turkish goods?
When there are two large open economies in the world, if capital goods become relatively cheaper compared to consumption goods in the foreign country, the world real interest rate will and the home country's current account will fall; rise fall; fall rise; rise rise; fall
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
Question 8 Suppose real GDP per capita in Sweden is 328,689 krona, and the price level in Sweden (measured using an international index) is 130. Suppose real GDP per capita in Botswana is 13,438 pula, and the price level (measured using that same index) in Botswana is 55. The market exchange rate is 1 pula = 0.84 krona. What would be the purchasing power parity adjusted ratio of real GDP per capita in Sweden to that in Botswana?
Explain why an increase in national saving (S) relative to investment (I) may lead to a current account surplus under flexible exchange rates.
a) True or False? In Mankiw’s model of an open economy, the demand for loanable funds has two components: one is the need of domestic residents to borrow to purchase newly produced capital goods, and the second is their need to borrow to purchase foreign assets b) True or False? In Mankiw’s model of an open economy, the nominal exchange rate, e, is determined by the interaction of the supply of dollars and the demand for dollars in the market for foreign currency exchange. c) In an open economy, an increase in a country’s real interest rate will (discourage,encourage) domestic purchases of foreign assets and will (discourage, encourage) foreign purchases of domestic assets. Therefore, an increase in the real interest rate will (increase,reduce) net capital outflow. Answer these three sub-parts