Assume the model of simultaneous short-run equilibrium in output market and assetmarket under the floating exchange rate regime. How would you best describe therelationship between domestic currency exchange rate and output? Select one - the mostappropriate answer.Exchangerate, EE¹DDAAY1Output, YWhen domestic currency depreciates it makes domestic goods and services less expensivecompared to foreign goods and services bringing about the aggregate demand increase andconsequently increase in output.When domestic currency depreciates it makes domestic goods and services more expensivecompared to foreign goods and services bringing the aggregate demand down that results in outout

Answer :) According to your data The correct answer is: When domestic currency depreciates, it…

Answered: Assume the model of simultaneous…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In the short run of a model with sticky prices, a reduction in the money supply raises the nominal interest rate and appreciates the currency. In this case the country's expected real interest rate will In addition, the real exchange rate, after initially will subsequently The latter movement of the real exchange rate satisfies the real interest parity condition which indicates that a country's currency will be expected to undergo a real depreciation when its real interest rate ▼real interest rates elsewhere.
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The Federal Open Market Committee of the Federal Reserve (the Fed) announced a rate hike of half a percentage point after its two-day meeting on May 4, 2022, raising the target range for the federal funds rate to 0.75-1.0%. Using the IS-LM-IP model, graphically illustrate and explain what HKMA must do to maintain the pegged exchange rate. Also discuss what effect this will have on domestic output and net exports. In your graphs, clearly label all curves and equilibria.
Using the IS-LM-UIP diagram, show and explain the effect of the increase in taxes in the fixed exchange rate regime. Comment the efficiency of such shock.
Мехico USA Good Meat Textiles Churros Electronics Energy Good Meat Textiles Cost Price MP9,000 MP8,000 MP4,000 $500 $400 Donuts Electronics Energy $160 MP7,000 MP12,000 $300 $600 2. Using the general monetary model of long-run exchange-rate determination, explain the effect and timing of (a) a domestic price increase, and (b) expectation of a domestic price increase on Home's exchange rate. (Mexico as Home)
Under flexible exchange rate regime, the spot exchange rate a. Is maintained by the monetary authority's intervention to buy domestic currency b. Increase in the demand of the domestic currency causes appreciation of the currency (the exchange rate is foreign/domestic) which in turn shifts demand to the right. c. Increase in the demand of the domestic currency causes depreciation of the currency (the exchange rate is foreign/domestic) which in turn shifts demand to the right. d. Increase in the demand of the domestic currency causes appreciation of the currency (the exchange rate is foreign/domestic) which in turn shifts demand to the left. e. Increase in the demand of the domestic currency causes depreciation of the currency (the exchange rate is foreign/domestic) which in turn shifts demand to the left. f. None of the above
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Define and derive the monetary approach to exchange rates. Why is it called a long-run model? Don't copy. I ll rate
Consider an increase in a country’s technology such that the relative supply of domestic products increases. Then, Group of answer choices the real and nominal exchange rates of the domestic country appreciate the real exchange rate of the domestic country appreciates, but the change in the nominal exchange rate is not determined the real exchange and nominal exchange rates of the domestic country depreciate the real exchange rate of the domestic country depreciates, but the change in the nominal exchange rate cannot be determined
Within the context of the Mundell-Fleming Model under a fixed exchange rate system, describe how the economy would respond to expansionary fiscal policy a.The IS* curve would shift outward to the right putting upward pressure on the exchange rate. The monetary authority would intervene by engaging in expansionary monetary policy like increasing government sending in order to increase national income b.The IS* curve would shift outward to the right putting upward pressure on the exchange rate. The monetary authority would intervene by engaging expansionary monetary policy like open market operation to increase national income. c.There will be no intervention since the exchange rate is already fixed and cannot be changed. d.The IS* curve would shift outward to the right putting upward pressure on the exchange rate. The monetary authority would intervene by selling domestic currency in the foreign exchange market.
Using the model that we have developed, show what would happen with a new equilibrium domestic price level and real output if the government increases government spending that are fully financed by increase of taxes (change of government spending is equal to the increase of taxes). What will be the size of the AD curve shift? Keeping nominal exchange rate and foreign price level constant, what will happen with the real exchange rate, import and net export?
Suppose, in the New Keynesian open economy model, that there is a negative shock in future total factor productivitv and there are no capital controls. a) Under a flexible exchange rate, what are the equilibrium effects? b) Now suppose that there is a fixed exchange rate. Repeat part(a)

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