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

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?
8
D3) . If the actual exchange rate for the euro value of the British pound is less than the exchange rate that would satisfy absolute PPP, which of the currencies is overvalued and which is undervalued? Why?
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
Assume that you are a Canadian living in Canada, and have $1,000CDN and you are debating about where to invest it for one year: in Canada or in the USA. Currently, the market interest rate in Canada (ICAN) is 7.00% and in the USA, the market interest rate (ius) is 6.00%. The current exchange rate is $1USD= $1.35CAD. The spot exchange rate (R) has US currency in the denominator and Canadian currency in the numerator. The forward exchange rate (F) is the spot exchange rate one year from now. Using above information, complete the below statements, filling in your final, complete answer in the space/box provided to the right of the statement. Do not show your work.
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
EXCHANGE RATE (Dollars per euro) The following graph shows the short-run supply schedule (S,) and demand schedule (D) for the euro. S, denotes the long-run supply schedule of euros. The initial equilibrium exchange rate is $1.20 per euro. Suppose that the demand for euros increases to D,. On the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate. Then use the grey point (star symbol) to indicate the long-run equilibrium exchange rate. Note: Dashed drop lines will automatically extend to both axes. The following graph shows the short-run supply schedule (So) and demand schedule (Do) for the euro. Si denotes the long-run supply schedule of euros. The initial equilibrium exchange rate is $1.20 per euro. Suppose that the demand for euros increases to D1. On the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate. Then use the grey point (star symbol) to indicate the long-run equilibrium exchange rate. Note:…
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.
Unsure if my answers and graphs are correct