A country observes that its currency is gainingnominal value in the foreign exchangemarket. All other things being equal, if thecountry's output gap is currently zero, whatcan we expect to happen to its aggregateproduct (Y), price level (P) and interest rate (i)in the short run?O a. We can expect Y to decrease, P todecrease, and i to remain unchanged.Ob. We can expect Y to decrease, P todecrease, and i to decrease.O c.None of the alternatives is correct.Od.We can expect Y to increase, P toremain unchanged, and i to remainunchanged.Oe. We can expect Y to increase, P toincrease, and i to increase.Check

Here, it is given that the currency of a country appreciates in the foreign exchange market as the…

A country observes that its currency is gaining nominal value in the foreign exchange market. All other things being equal, if the country's output gap is currently zero, what can we expect to happen to its aggregate product (Y), price level (P) and interest rate (i) in the short run? O We can expect Y to decrease, P to decrease, and i to remain unchanged. O b. We can expect Y to decrease, P to decrease, and i to decrease. O c. None of the alternatives is correct. Od. We can expect Y to increase, P to remain unchanged, and i to remain unchanged. e. We can expect Y to increase, P to increase, and i to increase.

A country observes that its currency is gaining nominal value in the foreign exchange market. All other things being equal, if the country's output gap is currently zero, what can we expect to happen to its aggregate product (Y), price level (P) and interest rate (i) in the short run? O We can expect Y to decrease, P to decrease, and i to remain unchanged. O b. We can expect Y to decrease, P to decrease, and i to decrease. O c. None of the alternatives is correct. Od. We can expect Y to increase, P to remain unchanged, and i to remain unchanged. e. We can expect Y to increase, P to increase, and i to increase.

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

8. In a small open economy, net exports NX depend negatively on domestic in- come Y and negatively on the real exchange rate & = = eP/P*, where e is the nom- inal exchange rate (the foreign-currency price of domestic currency), and P and P* are the domestic- and foreign-currency prices of domestically and foreign- produced goods, respectively. Assume initially that both P and P* are fixed. There is perfect mobility of capital, so balance-of-payments equilibrium requires that i i*, where i and it are the domestic and foreign interest rates. Assume the economy adopts a flexible exchange rate regime. = (a) Using the IS-LM-BP model, carefully explain whether monetary policy and/or fiscal policy can succeed in raising the economy's GDP. Now assume instead that the economy adopts a fixed exchange rate regime. (b) For each of the policies below, explain what foreign-exchange market intervention is required to support the fixed exchange rate, and whether the policy would succeed in raising…
A country's economy is described with the following parameters: Y=8500, G=1700, T=500, C=300+(1/2)(Y-T), I=2500-30r, NX-1200-150Excangerate, and r is 11 (world interest rates). Find equilebrium exchange rate approximately for this country. O a. 2.80 O b. 7.13 O c. 9.80 O d. 5.80 O e. 8.00
Analyze the adjustment of the dollar/euro exchange rate following a permanent increase inthe U.S. money supply. In your analysis show both the short-run and the long-run effects ofthis disturbance. Suppose that the economy starts with all variables at their long-run levelsand that output remains constant as the economy adjusts to the money supply change. Alsoassume that the decrease in the money supply affects exchange rate expectations today. Please illiustrate any graph if needed. Thank you
If a country's currency depreciates, what would be the effect on the Bala Select one: O a. It becomes flatter. O b. A shift to the right. O c. It becomes steeper. Od. A shift to the left.
13. Study Questions #13. Ch 11. Suppose the interest rate (on an annual basis) on three-month Treasury bills is 10% in London and 6% in New York, and the spot rate of the pound is $2.03. How can a U.S. investor profit from uncovered interest arbitrage? O Purchase pounds at $2.03 in New York to buy U.K. Treasury bills in London, thus earning 4% per year. O Purchase pounds at $2.03 in New York to buy U.K. Treasury bills in London, thus earning 3% per year. O Purchase pounds at $2.03 in New York and sell them in the U.K., thus earning 4%. O Purchase pounds at $2.03 in New York to buy U.K. Treasury bills in London, thus earning 3.05% per year.
The observation that short-term capital has become increasingly mobile internationally probably implies the BP curve has O A. become steeper O B. become flatter C. become unimportant D. become downward sloping
Consider a small economy that does not permit international borrowing or lending. The country's autarky real interest rate is greater than the world real interest rate. Now suppose the economy removed capital controls. Which of the following is true? There is an excess supply of capital in the domestic economy and capital flows in O There is an excess demand for capital in the domestic economy and capital flows out There is an excess demand for capital in the domestic economy and capital flows in O There is an excess supply of capital in the domestic economy and capital flows out
Price Level P a T T T T LAS O Reference. Figure 9-16 I 1 T 1 B Q₁ Q₂ Real Output SAS, SAS, Refer to the graph above. Assume the economy is initially at point B. The graph correctly demonstrates an economy moving to point C if: the government decreases the money supply. O productivity increases by less than the increase in wages. O a country's exchange rate appreciates (gains value). wages rise by less than the increase in productivity. 11
Suppose a country's central bank announces that it is decreasing the long-run money growth rate to tame inflation. The country's currency will suddenly and its rate of depreciation will then O appreciate; rise O appreciate; fall O depreciate; rise O depreciate; fall
Lecture: Open Macro Question: A currency appreciation moves the BP curve to the ... because exports ... and imports . . The interest rate must .... since capital inflows are needed. ......... O a. left ; increase; decline; fall ; lower O b. left; decline; increase; rise; higher O C right; decline; increase; rise; higher O d. right; increase; decline ; fall ; lower e. right; increase; decline; rise; lower
Concerning a country's business cycle, rapid growth of production and employment is commonly associated with: Select one: O a. Small or shrinking trade deficits and current account deficits O b. Large or growing trade deficits and current account deficits Oc. Small or shrinking trade deficits and current account surpluses O d. Large or growing trade surpluses and current account surpluses
9. Consider savings-investment diagrams assuming that there are two countries in the world, A and B. Initially, both countries are identical, i.e., they have the same supply of savings and demand for investment. Therefore, even as open economies, they both have balanced current accounts, i.e., neither has a deficit or surplus. Now assume that in country A, the government increases the budget deficit, shifting the supply of savings to the left. If all other curves (A s investment demand, B s savings supply, B s investment demand) stay the same, what will the effect of the increase in A's budget deficit? a. Country B will have a CA surplus. b. Country A will have a KFA deficit. c. Investment in country B will increase. d. The world real interest rate will fall.