Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter29: Exchange Rates And International Capital Flows
Section: Chapter Questions
Problem 25CTQ: If a countrys currency is expected to appreciate in value, what would you think will be the impact...
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Question
explain like the case written below, but change the fixed exchange with freely exchange rate. what will happen?
![3
CASE: 3.
Monetary Policy
Perfect Capital Mobility
Fixed Exchange Rate policy
io-ig
6
LM
LM'
IS
Initial EQ - Eo - 25=LM.
y=0Y and i = is = ty
Monetary Policy OM, will shift
LM HLM'. So Short Run Ecg.
LM-IS-Y=OY,
L = 66,
in<ly there is
Capal
"ouffler](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F402693e2-a79e-44ab-81c0-693b0f662e5b%2F70473615-a08d-450d-94bb-ff3e1b42e6c3%2Fjnpk5c_processed.jpeg&w=3840&q=75)
Transcribed Image Text:3
CASE: 3.
Monetary Policy
Perfect Capital Mobility
Fixed Exchange Rate policy
io-ig
6
LM
LM'
IS
Initial EQ - Eo - 25=LM.
y=0Y and i = is = ty
Monetary Policy OM, will shift
LM HLM'. So Short Run Ecg.
LM-IS-Y=OY,
L = 66,
in<ly there is
Capal
"ouffler
![IS-LM.
= 5
- will shift
A Run EQ.
reis
Jual
ouffler
Demand for FET
F
DMS
320
Da
- it will shift L'M LOLM!
So. Log in EQ + IS=LM.
i=10.ly
Ay=a](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F402693e2-a79e-44ab-81c0-693b0f662e5b%2F70473615-a08d-450d-94bb-ff3e1b42e6c3%2F3ez0rf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:IS-LM.
= 5
- will shift
A Run EQ.
reis
Jual
ouffler
Demand for FET
F
DMS
320
Da
- it will shift L'M LOLM!
So. Log in EQ + IS=LM.
i=10.ly
Ay=a
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