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?

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?

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

2
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
A10 Suppose that P = 100, P* = 200, e = 0.75 where P is the domestic price level, P* is the foreign price level and e is the nominal exchange rate (i.e. number of domestic currency units required to buy 1 unit of foreign currency).a) Find the real exchange rate.b) If the domestic price level increases, what will be the effect on the real exchange rate, imports and exports?
18
A6)
In a country if households decide to save .........., then the real exchange rate ............ and net exports ....... (QUESTİON MAY HAVE MORE THAN ONE CORRECT ANSWER.) a.more / falls / rise b.more / rises / rise c.more/rises / fall d.less / falls / rise e.less / rises/fall
1
In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate? (explain the answer) a. 4/2.7 loaves of British bread per loaf of French bread b. 3.6/3 loaves of British bread per loaf of French bread c. 3/3.6 loaves of British bread per loaf of French bread d. 2.7/4 loaves of British bread per loaf of French bread
Question 2 Full explain this question and text typing work only thanks
Question: A- Turkey has a flexible exchange rate regime. Discuss in detail what the effects of an expansionary fiscal policy would be on output levels under this regime.How do you think the effects of such a policy would differ under a fixed exchange rate regime? B- Turkey has a flexible exchange rate regime. Assuming perfect capital mobility, do you think it is possible to control the interest rate and the exchange rate at the same time? Please discuss in detail and explain why or why not.
I need to draw a graph showing the foreign exchange market in south africa wherein the majorty of sales of citrus fruit are going to europe, explain the impact this increase in the demand for citrus fruit will have on the rand/euro exchange rate and the value of the rand