Macroeconomics (7th Edition)
7th Edition
ISBN: 9780134738314
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 18.5.5PA
Subpart (a):
To determine
The expansionary fiscal policy effect on real GDP in closed economy and open economy at short-run.
Subpart (b):
To determine
The expansionary fiscal policy effect on real GDP in closed economy and open economy at short-run.
Subpart (c):
To determine
Impact of increasing interest rate of the major trading partner.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
What does it mean by "monetary and fiscal policies in a closed economy" when pertaining to macroeconomic policy in an open economy?
How can foreign exchange rates impact a business positively? How can foreign exchange rates have a negative impact on a business? In regards to a global insurance company, how can exchange rates affect the day to day running of their business?
Problem 3. An economist writing a column in a well-known paper makes the following
announcement. "There are good news and bad news. The good news is Turkey had a
temporary beneficial productivity shock that will increase output; the bad news is that the
increase in output and income will lead domestic consumers to buy more imported goods, and
our current account balance will fall." Assuming that Turkish economy is a small open
economy, analyze this statement (is it true or false?, why?) taking as given that a beneficial
productivity shock has indeed occurred.
Problem 4. Plot MPKf vs. K+1 graph. Explain why the slope of the curve is as you plot.
Using this graph explain how Kr+1 and It will change with the following changes. Make the
analysis separately for each event.
a) Future value of total factor productivity is expected to increase.
b) The tax rate on revenues of the firms decreases.
c) Relative price of capital goods increases.
d) Expected real interest rate increases.
Chapter 18 Solutions
Macroeconomics (7th Edition)
Ch. 18 - Prob. 18.1.1RQCh. 18 - Prob. 18.1.2RQCh. 18 - Prob. 18.1.3RQCh. 18 - Prob. 18.1.4PACh. 18 - Prob. 18.1.5PACh. 18 - Prob. 18.1.6PACh. 18 - Prob. 18.1.7PACh. 18 - Prob. 18.1.8PACh. 18 - Prob. 18.1.9PACh. 18 - Prob. 18.1.10PA
Ch. 18 - Prob. 18.1.11PACh. 18 - Prob. 18.2.1RQCh. 18 - Prob. 18.2.2RQCh. 18 - Prob. 18.2.3RQCh. 18 - Prob. 18.2.4RQCh. 18 - Prob. 18.2.5PACh. 18 - Prob. 18.2.6PACh. 18 - Prob. 18.2.7PACh. 18 - Prob. 18.2.8PACh. 18 - Prob. 18.2.9PACh. 18 - Prob. 18.2.11PACh. 18 - Prob. 18.2.12PACh. 18 - Prob. 18.2.13PACh. 18 - Prob. 18.2.14PACh. 18 - Prob. 18.3.1RQCh. 18 - Prob. 18.3.2RQCh. 18 - Prob. 18.3.3RQCh. 18 - Prob. 18.3.4PACh. 18 - Prob. 18.3.5PACh. 18 - Prob. 18.3.6PACh. 18 - Prob. 18.3.7PACh. 18 - Prob. 18.3.9PACh. 18 - Prob. 18.3.10PACh. 18 - Prob. 18.4.2RQCh. 18 - Prob. 18.4.5PACh. 18 - Prob. 18.4.6PACh. 18 - Prob. 18.4.7PACh. 18 - Prob. 18.4.8PACh. 18 - Prob. 18.5.1RQCh. 18 - Prob. 18.5.2RQCh. 18 - Prob. 18.5.3RQCh. 18 - Prob. 18.5.4PACh. 18 - Prob. 18.5.5PACh. 18 - Prob. 18.5.6PACh. 18 - Prob. 18.5.7PACh. 18 - Prob. 18.1RDECh. 18 - Prob. 18.2RDECh. 18 - Prob. 18.3RDECh. 18 - Prob. 18.4RDECh. 18 - Prob. 18.5RDECh. 18 - Prob. 18.1CTE
Knowledge Booster
Similar questions
- Why do you think the UK decided to move out the EU? What do you think will be the business consequences for a non-European company investing in the UK after the BREXIT?arrow_forwardExplain only one difference between the closed and open economy?arrow_forwardCountry: Brazil Part 1 - What kinds of specific actions has the IMF taken in order to address economic or financial crises of your focus country? What is an example of any relationship or interaction that your focus country has had with the IMF? Part 2 – What are 3 examples of FDI news related to your focus country? (this could include information about investment promotion activity that your country sponsors/promotes) Part 3 – Please post images related to the following topics (include some verbiage explaining them) -FDI -foreign exchange market -regional economic integrationarrow_forward
- 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?arrow_forward3. What will happen to a country that fixes the price of foreign exchange below equilibrium?arrow_forwardIn the open-economy macroeconomic model, if investment demand increases, then the real interest rate will _____________________ and the real exchange rate will _________________. Group of answer choices increase, increase decrease, increase increase, decrease decrease, decreasearrow_forward
- If the trade deficit of the United States increases, how is the current account balance affected?arrow_forwardDoes a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?arrow_forwardIn the Mundell-Fleming model of the open-economy, what is: A. The condition for equilibrium in the product market? B. The condition for equilibrium in the money market? C. The condition for equilibrium in the foreign exchange market?arrow_forward
- What are the three components of the Balance of Payments? Explain the relationship between the Current Account and Financial Account. Why Balance of Payments should be equal to Zero on the long run? What is the logic in this?arrow_forwardIf the United States were running large trade deficits with Germany under an international gold standard system, we would expect which of the following to occur? The money supply in Germany would increase all of the other choices U.S. gold reserves would decrease Germany's gold reserves would increase. The money supply in the U.S. would decrease. none of the other choicesarrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
- Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax