If a war broke out abroad, it would affect the El Dorado economy in many ways. Use the model of the large open economy to examine each of the following effects of such a war. What happens in the El Dorado to saving, investment, the trade balance, the interest rate, exchange rate, price level and unemployment? (To keep things simple, consider each of the following effects separately.) Questions a. The El Dorado government, fearing it may need to enter the war, increases its purchases of military equipment. b. Other countries raise their demand for high-tech weapons, a major export of the El Dorado. c. The war makes El Dorado consumers uncertain about the future, and the consumers save more in response. rond

If a war broke out abroad, it would affect the El Dorado economy in many ways. Use the model of the large open economy to examine each of the following effects of such a war. What happens in the El Dorado to saving, investment, the trade balance, the interest rate, exchange rate, price level and unemployment? (To keep things simple, consider each of the following effects separately.) Questions a. The El Dorado government, fearing it may need to enter the war, increases its purchases of military equipment. b. Other countries raise their demand for high-tech weapons, a major export of the El Dorado. c. The war makes El Dorado consumers uncertain about the future, and the consumers save more in response. rond

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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