Chapter 19 HomeworkUse the green line (triangle symbol) to show the supply curve in this market before the budget deficit. Then use the purple line (diamond symbol) toshow the supply curve after the budget deficit.REAL EXCHANGE RATEMarket for Foreign-Currency Exchange10-20-15-10250-Demand5101520QUANTITY OF DOLLARS (Billions)Summarize the effects of a budget deficit by filling in the following table.Initial SupplySupply with DeficitReal Interest Rate Real Exchange RateTrade BalanceEffects of a Budget Deficit?

The Intricate Dance: How Government Budget Deficits Impact the Real Exchange RateGovernment spending…

Answered: Chapter 19 Homework Use the green line…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question: In an open economy operating under a pegged exchange rate system, if the government decides to pursue expansionary fiscal policies to stimulate economic growth, what is the most likely short-term impact on the country's foreign exchange reserves? A. A significant increase in foreign exchange reserves due to a boost in exports. B. No change in foreign exchange reserves, as the pegged exchange rate system neutralizes fiscal impacts. C. A decrease in foreign exchange reserves due to potential capital outflows and the need to maintain the peg. D. An increase in foreign direct investment, leading to a rise in foreign exchange reserves. Don't use chatgpt it is giving wrong answer and please provide valuable answer
Q20
5. Balance of payments and the foreign exchange market The following graph shows the market for euros in terms of dollars. The market is initially in equilibrium at $1.00 per euro and 4 billion euros. Suppose an economic expansion in the United States leads to an increase in the incomes of American households, causing imports from Europe to rise. On the graph, show the effect of an expansion in the United States that leads to an increase in American incomes.
3
In periods of rapid U.S. growth, the rapid growth usually adds to large U.S. trade deficits by: O increasing U.S. national income, which increased U.S. imports. O reducing real interest rates in the United States. O increasing U.S. national income, which decreased U.S. exports. O increasing U.S. tax revenues and reducing the Federal budget deficit.
A. Canada produces natural resources (coal, natural gas, and others), the demand for which has increased rapidly as China and other emerging economies expand. i. Explain how growth in the demand for Canada's natural resources would affect the demand for Canadian dollars in the foreign exchange market. Explain how the supply of Canadian dollars would change. ii. iii. Explain how the value of the Canadian dollar would change. iv. Illustrate your answer with a graphical analysis. 1
3. If interest rates increase in a country with a fixed exchange rate, what will the central bank do? A. Buy the country's currency B. Sell the country's currency C. Engage in contractionary fiscal policy 4. The United States has floating exchange rates. Suppose there is an increase in inflation in the United States. What will happen? A. The U.S. central bank will sell U.S. currency so the exchange rate remains constant B. The U.S. central bank will buy Euros so the exchange rate remains constant C. The exchange rate (price of a dollar) will go up D. The exchange rate (price of a dollar) will go down 5. Belize uses a fixed exchange rate, with one Belize dollar equal to one half of a U.S. dollar. There is an increase in U.S. citizens traveling to Belize on vacation. What will the central bank do? A Buy the country's currency B. Sell the country's currency Sell bonds to banks C.
a decrease an increase no change REAL GDP our answer to the graph question, the appreciation of the U.S. dollar leads to in aggregate output in the United States. in the aggregate price level and
Question 1It is often said by economists that fixed exchange rates make monetary policy totally ineffective as a stabilization tool. Explain why you agree or disagree with this statement. Assume an open economy. Keynes favoured fiscal policy over monetary policy to stabilize the economy and fixed exchange rates over flexible exchange rates. Is it consistent or inconsistent to pair fiscal policy with fixed exchange rates and monetary policy with flexible exchange rates? Explain why.

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