Contractionary fiscal Devaluation

Q: Illustrate graphically the effects in the foreign exchange market of an expansionary monetary policy…

A: Foreign exchange rate: It refers to the change in the price of one currency as compared to the…

Q: Suggest an appropriate policy in order to increase national income for fixed and flexible exchange…

A: Mundell-Fleming model assume fixed prices and small economy.

Q: Suppose the Central bank declares an increase in Statutory Liquidity Ratio as well as CRR. What…

A: An international exchange rate, also said as a foreign exchange rate. It is the price of a currency…

Q: Consider the Canadian economy under a flexible exchange rate system. Which one of the following will…

A: Interest rates rises due to rise in demand for credit in the market. This rise in demand for credit…

Q: Suppose a small open economy has the following money demand function: M/P = L (r, Y-T), wherer is…

A: Answer -

Q: Explain why in case of a fixed exchange rate regime temporary and permanent fiscal policy changes do…

A: A fixed exchange refers to when the value of a country's currency is fixed against foreign…

Q: In general, currency crises are associated with severe falls in economic activity. However, a good…

A: GDP, inflation, unemployment, and governmental activities all influence the macroeconomic…

Q: Consider a small open economy with no perfect capital mobility and fixed exchange rate regime. If…

A: Bonds prices are the demand and supply forces acting in the bond market . Where the fresh  demand…

Q: Assume that for an economy the Marshall-Lerner condition does not hold, and further, elasticities…

A: It can be defined as a concept that helps an economic agent to understand how much currency of one…

Q: Which of the following is impossible for a country to choose simultaneously? Question 17 options:…

A: The question is asking us to identify which combination of economic policies is impossible for a…

Q: Consider the AA-DD model with flexible exchange rates. Assume the economy is initially at full…

A: Government Spending is defined as the kind of spending on the public sector, and provides services…

Q: Countries that choose to pursue a fixed exchange rate have ____ flexibility to pursue monetary…

A: The fixed exchange rate is used by the government or the central bank of the nation. The main…

Q: Consider an open economy with floating exchange rates under the Mundell-Fleming framework. Discuss…

A: LM curve shows the direct relationship between interest rate and output. The LM curve is upward…

Q: What does the Marshall-Lerner condition describe?   a. When the valuation effect from a real…

A: The Marshall-Lerner condition is an economic theory that deals with the impact of exchange rate…

Q: Consider the extent to which fiscal policy actions can influence the real income level of a small…

A: The sovereign wealth fund of brazil is the type of fund that is derived from the countries own…

Q: Explain why, when assuming imperfect competition with non-homogenous goods and unemployment, the…

A: Introduction Macroeconomics is a subfield of economics that examines an economy's overall…

Q: You are given the following information. The current dollar/euro exchange rate is 1.25 dollars per…

A: The rate of inflation is defined as an increase in price levels of goods and services over a year,…

Q: Following the pandemic, nations implemented temporary tax reductions to spur economic expansion. To…

A: The impact of tax cuts on output. Tax cuts increase the disposable income of households. This leads…

Q: The equilibrium interest rate determined in the IS-LM model will give rise to an implied exchange…

A: In an open economy, the general equilibrium can be influenced by the international trade of the…

Q: If the monetary authority contracts money supply and the fiscal authority raises taxes, then in a…

A: When the central bank contracts the money supply with raising the interest rates, it makes the…

Q: Consider an economy that lasts for two periods, period 1 and period 2. Let T B1 denotes the trade…

A: Given, CAt = rB∗ t−1 + T Bt (1) and CAt = B ∗ t − B ∗ t−1 (2)

Q: The last time The Economist checked, a Big Mac costs $5.65 in the US while it costs 13.43 zloty…

A: Given information: A Big Mac cost in the United States is $5.65  The same Big Mac cost in Poland is…

Q: in 600 words, explain how relative income levels of nationals can be a demand-related factor that…

A: The relative income levels of nationals in Jamaica and Barbados play a fascinating, yet often…

Q: Q4) Suppose that Covid -19 increases the saving rate of all countries, not only the U.S., so R*…

A: The process of changing a given currency into a different one at a specified rate is known as…

Q: Over the last few years, there have been concerns that both Studentville and Chickenville will…

A: Mundell-Fleming Model describes the relationship that an open economy possesses with an interest…

Q: Evaluate the validity of the following claim: “Under a fixed exchange rate, the monetary authority…

A: In the international market, two types of exchange rate system prevails that are fixed and foreign…

Q: d. Again, suppose you wanted to make domestic industries more competitive but did not want to alter…

A: International economics has significance because it aids in understanding the interconnection and…

Q: Suppose the US dollar is currently trading at a nominal exchange rate of e=120 Yen. If the inflation…

A: We are going to use uncovered interest rate parity to answer this question.

Q: The incompatible trinity, also known as the trilemma, states that it is impossible to have all three…

A: The objective of the question is to calculate the rate of real appreciation of the yuan when the…

Q: What of the following is not among the advantages of adopting a flexible exchange rate regime?…

A: Countries holding large reserves acts as negative factor affecting the country's exchange rate. In a…

Q: Please provide an account of the theory of Purchasing Power Parity (PPP) and critically evaluate its…

A: Purchasing Power Parity Purchasing power parity (PPP) is an exchange rate theory and a mechanism of…

Q: Show using the Mundell-Fleming model how an increase in tariffs would affect the nominal exchange…

A: Mundell-Fleming model is the extension  of IS-LM model in the run, that is explained as follows.

Q: Suppose the United States (US) economy is experiencing a recession or a decrease in its level of…

A: IS curve shows the combination of the interest rate and output level at which the goods market is in…

Q: uppose a small open economy has the following money demand function: M/P = L (r, Y-T), where r is…

A: The money demand curve shows the inverse relationship between the quantity of money demanded and the…

Q: IS-LM model

A: The open-economic system IS-LM (Investment-Saving, Liquidity Preference-Money Supply) version…

Q: Suppose that a country with pegged exchange rate has reserves of $8 billion and is running a deficit…

A: Given Foreign exchange reserves = 8 Billion $ Current account deficit = 1 Billion per month…

Q: Country Z has a fixed exchange rate policy and its own currency. Country Z experienced an inflation…

A: Given information Inflation in country Z= 27% Price index increased only by 3% for the trading…

Q: Assume the following to be a portion of the simplified balance of payments statement for a…

A: The simplified balance of payment table for the given economy is stated below.…

Q: An economy with a strong export sector has been accumulating large surpluses in its current account.…

A: The objective of the question is to identify the most appropriate action for the government to take…

Q: Consider the DD-AA model for the determination of exchange rate of a small country and assume that…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: A government wants to reduce both the country’s inflation rate and its current account surplus. What…

A: Inflation refers to the rise in the general prices of the product, like rising in the price of fuel.…

Q: Suppose that the Mexican government decides to fix or peg the dollar-peso exchange rate at P20 = $1.…

A: A pegged exchange rate is a fixed exchange rate system where the value of one country's currency is…