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Show the effects of expansionary policy on output and the price level in an open economy when there is full employment.
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- Policymakers in open economies face a “trilemma” of three conditions that cannot all be realized at the same time. Which one of the following is not part of this “trilemma” of open-economy macroeconomics? Multiple Choice Be open to international flows. Implement capital controls. Fix its exchange rate. Control its domestic interest rate.Answer the given question with a proper explanation and step-by-step solution. Suppose that εD = 0.70 and ε_D^F = 0.50 for a given country: Suppose that the foreign currency price of this country’s exports falls by 18% following a devaluation. What will happen to the quantity of exports?You are an IMF official going to a country whose export earnings are not able to pay for imports. The government has requested a loan from the IMF. Which areas would you recommend the government to cut: (1) education, (2) salaries for officials, (3) food subsidies, and/or (4) tax rebates for exporters
- Discuss why price levels are on average lower in emerging markets than in industrialised economies.Depending on which curve is affected by the government policy, shift either the SRAS curve or the AD curve to reflect the change that would successfully restore potential output. 150 SRAS AD 130 110 SRAS 90 AD, 70 AD LRAS 50 20 22 24 26 28 30 OUTPUT (Trillions of dollars) Suppose that in February the government undertakes the type of policy required to bring the economy back to potential output given in the previous scenario. In April 2020, U.S. imports increase because the United States has eliminated trade restrictions on Japanese goods. Because of the lags v associated with implementing fiscal policy, the impact of the government's new policy will likely once the effects of the policy are fully realized. PRICE LEVELWeek 6: Question Number 6.2. You are an IMF official going to a country whose export earnings are not able to pay for imports. The government has requested a loan from the IMF. Which areas would you recommend the government to cut: (1) education, (2) salaries for officials, (3) food subsidies, and/or (4) tax rebates for exporters?
- An economy is said to be closed economy, when: a) Saving exactly equals investment at full employment b) Imports exactly equal exports, so that trade is balanced c) Domestic firms invest in industries overseas d) The home economy is isolated from foreign trade.Consider the following model of an economy with no international trade, and in which the price level is fixed: C = 40 + (8/9)∙DI I = 30 G = 30 Taxes = (1/8)∙GDP where C is consumption demand, DI is disposable income, I is planned investment, G is government purchases, and all whole numbers are in billions of dollars. Determine the equilibrium level of production (GDP) in this economy (show your work), and draw this equilibrium situation on a graph. Use the multiplier to determine the change in equilibrium GDP that would result from an exogenous 16 billion dollar increase of government purchases. Then determine…Globalization tends to: Group of answer choices increase the labor demand for exporting goods industries. increase the labor demand for importing goods industries. decrease the wages for exporting goods industries. increase the wages for importing goods industries.
- Why does the decline in value of a certain currency cause imports to be expensive and exports cheaper, resulting in cost-push and demand-pull inflation?The table given below shows the levels of real GDP (Y) and the corresponding levels of consumption (C), planned investment (I), export (EX), and import (IM) of an open economy. Assume that in this country, the aggregate price level is constant, the interest rate is fixed, and there are no taxes. What is the equilibrium level of real GDP?The ongoing trade war between the U.S. and China would adversely affect global economic growth, and their unilateral actions on trade apparently seem to be designed to bypass the rules set by the WTO, and could thus have a serious impact on global trade and governance. It seems clear that the U.S. is purely diverting attention from its own structural problems, and which are ultimately themselves responsible for imbalances in trade. President Trump, however, is attempting to establish a (probably erroneous) link between rising U.S. imports and the decline in Page 6 of 6 its manufacturing industries. Since August 2018 year, both countries have together imposed tariffs on $100 billion worth of goods and which will almost certainly escalate further with increased trade retaliation. Source: WorldFinancial Review(Dec, 2018) Question: Discuss how the Trade War will impact of the World Economy. [1000 words]