4. A further look at Table 19.1 Table 19.1 has four entries. Using Figure 19.5 as a guide, draw the situations illustrated in each of the four entries in Table 19.1. Be sure you understand why the direction of change in government spending and the real exchange rate is labelled as ambiguous in each entry. Table 19.1 Exchange rate and fiscal policy combinations Table 19.1 Exchange rate and fiscal policy combinations Initial Conditions Low output High output Trade Surplus 8? G↑ E↑ G? Trade Deficit el G? B? G↓ Net exports, NX Demand, Z ZZ' AG <0 ZZ ANX > 0 Demand for domestic goods 45° Y Y' Output, Y ANX > 0 B C NX' NX Output, Y
4. A further look at Table 19.1 Table 19.1 has four entries. Using Figure 19.5 as a guide, draw the situations illustrated in each of the four entries in Table 19.1. Be sure you understand why the direction of change in government spending and the real exchange rate is labelled as ambiguous in each entry. Table 19.1 Exchange rate and fiscal policy combinations Table 19.1 Exchange rate and fiscal policy combinations Initial Conditions Low output High output Trade Surplus 8? G↑ E↑ G? Trade Deficit el G? B? G↓ Net exports, NX Demand, Z ZZ' AG <0 ZZ ANX > 0 Demand for domestic goods 45° Y Y' Output, Y ANX > 0 B C NX' NX Output, Y
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter23: The International Trade And Capital Flows
Section: Chapter Questions
Problem 46P: Imagine that the economy of Germany finds itself in the following situation: the government budget...
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Transcribed Image Text:4.
A further look at Table 19.1
Table 19.1 has four entries. Using Figure 19.5 as a guide, draw the situations illustrated in each of the four entries in
Table 19.1. Be sure you understand why the direction of change in government spending and the real exchange rate
is labelled as ambiguous in each entry. Table 19.1 Exchange rate and fiscal policy combinations
Table 19.1 Exchange rate and fiscal policy combinations
Initial Conditions
Low output
High output
Trade Surplus
8? G↑
E↑ G?
Trade Deficit
el G?
B? G↓
Transcribed Image Text:Net exports, NX
Demand, Z
ZZ'
AG <0
ZZ
ANX > 0
Demand for
domestic goods
45°
Y
Y'
Output, Y
ANX > 0
B
C
NX'
NX
Output, Y
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