Q: The following graph shows the market for loanable funds in Aperto, a large open economy. The…
A: When the government influence the economic outcome by changing the tax or its spending or both then…
Q: Generally, how does the standard of living in the United States today compare to the standard of…
A: Standard of Living Comparison The standard of living in the United States today is generally higher…
Q: Describe in one sentence what Ricardian equivalence implies for the government budget and the…
A: Ricardian equivalence is an economic theory proposing a link between government deficits and private…
Q: Domestic Saving, Supply Demand Supply Demand ReadSpeaker 10 20 30 40 50 QUANTITY OF LOANABLE FUNDS…
A: Demand for loanable funds shows the inverse relationship between the real interest rate and the…
Q: When a country exports more goods and services than it imports, this is called Multiple Choice a…
A: Exports refer to those goods and services which are produced in one country and supplied to another.
Q: Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly…
A: An expansionary fiscal policy aims to stimulate financial activity by putting more money in the…
Q: If the economy is producing at the potential level of output, Yp, but there is a trade deficit. How…
A: Fiscal policy alludes to the utilization of government spending and taxation to impact the economy.…
Q: Is economy in a better shape today than it was when the article was written? Refer to inflation,…
A: The American economy had its ups and downs.Since 1980's there was the cycle of business…
Q: Some experts believe a deficit is harmful. Some do not. The US has run a large trade deficit for…
A: A country is said to have a trade deficit when the value of its imports is greater than that of the…
Q: Which of the following may not be associated with a deficit? Select one: a. A need to increase…
A: When expenditures exceed income, there is a budget deficit, which can be a sign of how well-off a…
Q: Use an open market IS-LM diagram to explain the result of fiscal expansion under fixed exchange rate…
A: *ANSWER :-
Q: Why is the statstic for fiscal deficits are so closely monitired in small fixed exchange rate…
A: In fixed(FEX) exchange-rate system, the exchange-rate(EXR) is kept constant that is the point where…
Q: Imagine you are an economic advisor to the USA government during a severe recession. What specific…
A: This can be described as a concept that shows the contribution of an individual, organisation or any…
Q: a) In the open economy ISLM model, describe the effects of fiscal and monetary ex- pansions with…
A: “Since you have posted multiple questions, we will provide the solution only to the first question…
Q: From the macroeconomic environment from banks sources its inputs and to which it sells its outputs.…
A: The macro-environment of a country refers to how the macroeconomic conditions vary in which…
Q: Assume that in 2010, a country had a GDP of $500$500 billion, a budget deficit of $6$6 billion,…
A: Gross domestic product (GDP): - GDP is the market value of all final goods and services produced in…
Q: For a small open economy with perfect capital mobility, fiscal policy cannot affect real GDP. while…
A: Economics is a social science that studies how individuals, businesses, governments, and societies…
Q: The US typically imports (M) more goods and services than it exports (X). a. Explain what this…
A: a. The main component of a country's current account balance is usually invariably its trade deficit…
Q: What are some reasons to think that America is obligated to help poor countries? What are some…
A: When an economy opens up, it makes various exchanges with the rest of the world in terms of trade or…
Q: Why could a current account deficit stimulate an economy? List at least two reasons and explain with…
A: Current account deficit The current account deficit is a situation in the economy of a country…
Q: Show the effects of a fiscal expansion in an open economy with a flexible exchange rate. Show the…
A: When the government takes into use the budgetary instruments, for raising the money supply then this…
Q: dam
A: The hypothesis of twin deficits asserts that a reduction in the deficit of budget leads to causing a…
Q: Why is the bilateral trade deficit between 2 countries a bad measure of whether those countries…
A: The balance of trade is a metric that tracks the movement of exports and imports through time. A…
Q: Sketch a diagram of how a budget deficit causes a trade deficit. (Hint: Begin with what will happen…
A: A budget deficit is a situation that is faced by the government when its total spendings exceed the…
Q: Please refer to this question as you answer the one attached since they are linked. a)What is…
A: Answer- Need to find- equilibrium income in hypothetical,what is the government deficit? What is the…
Q: During the Great Recession there was a large drop in the US trade deficit. There was also a large…
A: Macroeconomic policy involves government endeavors with the goal of improving the economic system's…
Q: Macroeconomic: 1. With a fixed exchange rate and high capital mobility, is it appropriate to use…
A:
Q: Which of the following is a true statement describing expansionary fiscal policy’s impact in open…
A: In order to increase the AS (aggregate supply) in the economy, fiscal policies are enforced to have…
Q: Find Nil given a 5% interest rate at home and a 6% interest rate abroad with a home owned investment…
A: A proportion of the amount charged on borrowers' money is referred to as an interest rate. The…
Q: on a flexible exchange system using central bank's resources, show the effects of an expansionary…
A: Expansionary fiscal policy results in shifting the IS curve rightwards. This pushes the interest…
Q: Explain the expansionary fiscal policy in the short run and long run (ignoring exchange rate and…
A: Fiscal policy that intends to raise the aggregate demand is termed as expansionary. It can be done…
Q: A central bank whose sole purpose is to stabilize price growth will never cooperate with an…
A: Central bank is the apex Bank of the nation. The major aim of the central bank is to bring stability…
Q: To eliminate the deficit (and halt the growth of the net public debt), a politician suggests that…
A: The deficit means the government expenditure being larger than the government revenue. The…
Q: Assume an open economy with a fixed exchange rate and a credible inflation target. Also assume that…
A: Since you have asked multiple questions, we will answer the first question for you. If you want any…
Q: 1. The main objective of the macroeconomics to improve the standard of living of people whereas, to…
A: Macroeconomics objective: the goal of macroeconomic approaches is to expand the degree of public…
Q: Assume a system of flexible exchange rates and perfect capital mobility as well as equilibrium in…
A: With a flexible exchange rate currency, interest rates are determined externally and forex reserves…
Q: Suppose a temporary rise occurs in world demand for domestic products. Using the line drawing tool,…
A: Given:
Q: Macroeconomics. True/False Questions. Please answer all questions and give brief explanation. The…
A: (Since you have asked many questions, we will solve the first one for you. If you want any specific…
Q: Suppose policy makers want to increase net exports (NX) and keep output (Y) constant. Which of the…
A: The difference in the value of a nation's imports and exports is known as net exports or NX. The…
Q: Discuss and illustrate expansionary fiscal policy will have on the Australian dollar's exchange rate…
A: A government generally regulates the market through fiscal measures, the measures can be of two…
Q: Imagine an economy in which Ricardian equivalence holds. This economy has a budget deficit of 50, a…
A: Given: Budget deficit (G-T) = 50 Trade deficit (X-M) = 20 Private saving (S) = 130 Investment (I) =…
Explain the contractionary fiscal policy in the short run and long run (ignoring exchange rate and capital flows).
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
- Consider two large open economies - U.S. and Europe. If expansionary fiscal policy is adopted in Europe, what happens in the U.S? net capital outflow rises, the real interest rate falls and investment spending rises. net capital outflow falls, the real interest rate rises and investment spending rises. net capital outflow falls, the real interest rate rises and investment spending falls. net capital outflow rises, the real interest rate rises and investment spending falls. In a large open economy, if political instability abroad lowers the net capital outflow function, then the real interest rate: rises, while the real exchange rate falls and net exports rise. falls, while the real exchange rate rises and net exports fall. rises, while the real exchange rate rises and net exports fall. falls, while the real exchange rate rises and net exports rise. Political instability in the U.S. Political instability in the U.S.1) Consider a large open economy that engages in a fiscal contraction. In response to this policy change, what will happen to (a) national savings (b) the real rate of interest (c) net capital flows (d) the real exchange rate and (e) net exports?REAL EXCHANGE RATE (Units of foreign currency per dollar) QUANTITY OF DOLLARS Given this change, the dollar Supply Change due to a quota Demand Demand Supply Fill in the following table with the effect of a quota on the following items: Supply of Loanable Funds Real Interest Rate National Saving Net Exports
- Summarize the effects of a budget deficit by filling in the following table.Real Interest RateReal Exchange RateTrade BalanceEffects of a Budget Deficita Figure 1 shows the exogenous world interest rate (r*) determines the level of investment (I) and the difference between saving (S) and investment determines net capital outflow and net exports (NX) for a small open economy. What would happen to I, NX and S if: i. The government of this small open economy uses expansionary fiscal policy. ii. The government of other countries (abroad) uses contractionary fiscal policy. b Suppose the price of a cup of tea is Rs.50 in Pakistan and $2 in USA, the value of nominal exchange rate is $0.006364 per PKR. Calculate the value of real exchange rate (ε) and interprete its meaning. Also, discuss the relationship between net exports (NX) and real exchange rate. c Briefly explain the theory of purchasing power parity (PPP) with the help of example.In an open economy, and given a horizontal LM curve, which one of the following statements is correct regarding expansionary fiscal policy action? (a) An increase in government spending will lead to an increase in output and demand, the exchange rate will depreciate and exports will decrease; (b) A decrease in taxes will decrease aggregate spending, the exchange rate will depreciate and net exports will increase; (c) An increase in government spending will lead to an increase in output and demand, the exchange rate will remain unchanged and imports will increase; (d) A decrease in taxes will increase output and demand, the exchange rate will depreciate and net exports will increase.
- The exchange rate between the United States dollar and the Japanese yen is determined in a flexible foreign exchange market. A. Assume that Japan is currently in a recession. What fiscal policy action could the Japanese government take to eliminate the recession? B. What would be the effect of the fiscal policy action identified in Part A on interest rates in Japan? C. Draw a correctly labeled graph of the foreign exchange market for the United States dollar. Show on your graph the impact of the change in interest rates identified in Part B on each of the following: i. The supply of United States dollars i. The equilibrium exchange rate of the United States dollar D. What would be the effect of the change in the exchange rate identified in Part Cil on United States imports? E. What would be the effect of the change in United States exports identified in Part D on United States unemployment?The Biden Administration has recently enacted an infrastructure law and are planning to enact the Build Back Better Law. Using the diagram below, show how these fiscal expansionary policies, will impact U.S. output, interest rate and the dollar-Chinese yuan (元) exchange rate in the short run. Please be sure to label the lines you add. Below the diagram, explain what will happen and state whether the dollar will appreciate, depreciate or remain stable. Assume that Chinese fiscal and monetary policy remain unchanged and that the Chinese government in no way intervenes to affect the dollar-yuan exchange rate.What is fiscal deficit and what are two reasons why this economic statistic is so closely monitored in small fixed exchange rate economies?
- Consider two large open economies - U.S. and Europe. If expansionary fiscal policy is adopted in Europe, what happens in the U.S? Select one: A. net capital outflow rises, the real interest rate falls and investment spending rises. B. net capital outflow falls, the real interest rate rises and investment spending rises. C. net capital outflow falls, the real interest rate rises and investment spending falls. D. net capital outflow rises, the real interest rate rises and investment spending falls.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.A small open economy is described by the following equations: C = 300 + 0.8(Y - T) | = 220 - 40r NX = 300 - 60 e G = 200 T = 150 M = 1500 P = 3 r* = 5 L= Y - 60r If G increases by 30 to 230 What is the government budget deficit?