Explain why, when assuming imperfect competition with non-homogenous goods and unemployment, the monetary policy is efficient in the case of flexible exchange rate and fully inefficient when exchange rates are fixed.

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: Suppose that a country follows a managed float policy but that its exchange rate is currently…

A: Managed float policy: It is an international financial environment in which the rate of exchange…

Q: Explain why a decline in a country's exchange rate will generally increase the demand for its goods…

A: Demand for goods and services by the countries results in trading. Export and imports and the main…

Q: In the (flexible price)monetary model ,if a country initially has a stable exchange rate and price…

A: Monetary policy is a macroeconomic policy run by central bank of the country. There are two types of…

Q: Explain why with perfect capital mobility, monetary policy is completely ineffective when exchange…

A: Meaning of Monetary Policy: The term monetary policy refers to the situation under which the money…

Q: The rate at which one currency can be exchanged for another is the exchange rate.   B) Exchage rates…

A: Exchange rate - The exchange tells us about the worth of the currency of one country in comparison…

Q: Construct a model that shows how – in the longer run – money supply and demand as well as the dollar…

A: The exchange rate is the value of domestic currency required to be paid for obtained a unit of the…

Q: Suppose the nominal exchange rate (given as foreign currency per unit of U.S. currency as in class)…

A: When two countries trade with each other, a metric is required to translate the currency of one…

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: Assume an economy operates a fixed exchange rate regime. Assume the banking sector  increases their…

A: Answer -

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: 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: Under a fixed exchange rate regime, the value of the currency is pegged to a specific currency. This…

A: Exchange rate refers to the rate at which the currency of one nation can be exchanged by another…

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: A. Rationale: B. Which nation's currency appreciates? C. Which nation's currency depreciates? D. How…

A: The following figure represents the ER for Scotland and the US. On the X axis we have Quantity of…

Q: A country has a fixed exchange rate and capital is very mobile.  Because it is experiencing high…

A: In the international market, countries use two different approaches to set the value of their…

Q: Many developing countries, like Mexico, have moderate to high rates of inflation. At the same time,…

A: There is high inflation in many developed countries, such as México. As inflation is high currency…

Q: The government of the republic of Zambia decides to introduce a 100% ad valorem tariff on all…

A: Foreign Exchange Market: It is market where individuals and institutions demand and supply for…

Q: Given your understanding of exchange rate regimes, carefully explain why it is impossible for a…

A: An exchange rate regime is the set of policies and rules that a nation follows regarding its…

Q: Assume the country of Ballear is running a greater budget deficit and is forced to borrow large…

A: The exchange rate refers to the rate at which one country's currency is exchanged for the other…

Q: Does an expectation of a stronger exchange rate in the future affect the exchange rate in the…

A: The exchange rate refers to trading account that a country charges other country for the imports and…

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: In the Mundell-Fleming model for a small open economy with flexible exchange rates, if the economy…

A: Exchange Rate: The rate at which one country's currency can be exchanged for another's. It…

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: Please list and explain in your own words the benefits and costs when a country adopts a flexible…

A: Central banks no longer need to retain international reserves because of flexible exchange rates.…

Q: Now assume that the COVID-19 pandemic is over and the vaccine worked out. The economy recovered and…

A: EXCHANGE RATE OVERSHOOTING It is an economic model first discussed by Rudi Dornbusch to explaining…

Q: Suppose a currency is temporarily undervalued by a fixed exchange rate system, such as the…

A: A fixed exchange rate system often called a pegged exchange rate system, is a type of exchange rate…

Q: Contractionary fiscal Devaluation

A: Wanted to make domestic industries more competitive but did not want to alter aggregate income. with…

Q: What does it mean by "choosing an exchange rate system: constraints imposed by free capital flows",…

A: Exchange rate - The exchange tells us about the worth of the currency of one country in comparison…

Q: In explicit detail, describe the ‘twin deficit problem’, and discuss whether expansionary fiscal or…

A: (Q) In explicit detail, describe the ‘twin deficit problem’, and discuss whether expansionary fiscal…

Q: How do exchange rate movements affect economic conditions? And provide at least one way an owner of…

A: Exchange rate movements and economic conditions If the exchange rate is depreciated against foreign…

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: Country A’s goods have become relatively less expensive for Country B’s buyers due to a change in…

A: For country B's buyers,imports have become less expensive. That happens when exchange rate…

Q: If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the…

A: The nominal exchange rate is the rate at which one nation's currency can be exchanged for another,…

Q: There are two countries in the world, A and B. Suppose the central bank in country has an annual…

A: The exchange rate refers to the rate at which one currency is exchanged for the another. The…

Q: Analyze the effects of a increases in investment for both the fixed and flexible exchange rate cases…

A: Answer to the question is as follows :

Q: What determines the real exchange rate and what determines the nominal exchange rate in a small open…

A: For the production and consumption of goods, economic agents have derived a barter system. In the…

Q: Using the monetary model with flexible price to explain: the effects of an increase in real income…

A: Here we have to explain the effects of an increase in real income on domestic economy under flexible…