2. The Is - LM -UIP Model Consider an economy that experiences an increase in consumer confidence. Let UIP stand for the uncovered interest parity condition. Suppose the economy has a flexible exchange rate. In an IS - LM - UIP diagram, show the effect of the increase in consumer confidence on output, the interest rate, and the exchange rate. ( You must draw the graphs) b. (Following (a)) How does the change in the exchange rate, by itself, tend to affect output? Does the change in the exchange rate dampen (make smaller) or amplify (make larger) the effect of the increase in confidence on output? Suppose instead the economy has a fixed exchange rate. In an IS - LM -UIP diagram, show effect of the increase in consumer confidence on output, the interest rate. What must happen to the money supply in order to maintain the fixed exchange rate? ( You must draw the graphs) d. How does the effect on output in this economy, with fixed exchange rates, compared to the effect you found for the economy for part (a), with flexible exchange rates?
2. The Is - LM -UIP Model Consider an economy that experiences an increase in consumer confidence. Let UIP stand for the uncovered interest parity condition. Suppose the economy has a flexible exchange rate. In an IS - LM - UIP diagram, show the effect of the increase in consumer confidence on output, the interest rate, and the exchange rate. ( You must draw the graphs) b. (Following (a)) How does the change in the exchange rate, by itself, tend to affect output? Does the change in the exchange rate dampen (make smaller) or amplify (make larger) the effect of the increase in confidence on output? Suppose instead the economy has a fixed exchange rate. In an IS - LM -UIP diagram, show effect of the increase in consumer confidence on output, the interest rate. What must happen to the money supply in order to maintain the fixed exchange rate? ( You must draw the graphs) d. How does the effect on output in this economy, with fixed exchange rates, compared to the effect you found for the economy for part (a), with flexible exchange rates?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
answer for part D
Transcribed Image Text:2. The IS - LM -UIP Model
Consider an economy that experiences an increase in
consumer confidence. Let UIP stand for the uncovered
interest parity condition.
a. Suppose the economy has a flexible exchange rate. In
an
IS – LM – UIP diagram, show the effect of the increase in
consumer confidence on output, the interest rate, and the
exchange rate. ( You must draw the graphs)
b. (Following (a)) How does the change in the exchange
rate, by itself, tend to affect
output? Does the change in the exchange rate dampen
(make smaller) or amplify (make larger) the effect of the
increase in confidence on output?
Suppose instead the economy has a fixed exchange rate.
In an Is – LM - UIP
diagram, show effect of the increase in consumer
confidence on output, the interest rate. What must
happen to the money supply in order to maintain the
fixed exchange rate? ( You must draw the graphs)
d. How does the effect on output in this economy, with
fixed exchange rates,
compared to the effect you found for the economy for
part (a), with flexible exchange rates?
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