In a small open economy model, when every foreign country reduces government spending in their economies, the equilibrium real exchange rate (e): TIP: draw the plot (with net exports and net capital outflows) and move the appropriate line. O rises, and home country net exports fall. O rises, and home country net exports rise. O falls, and home country net exports fall.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Hh.85.

 

In a small open economy model, when every foreign country reduces government spending in their economies, the
equilibrium real exchange rate (e):
TIP: draw the plot (with net exports and net capital outflows) and move the appropriate line.
O rises, and home country net exports fall.
O rises, and home country net exports rise.
O falls, and home country net exports fall.
O falls, and home country net exports rise.
Policies that Influence Real Exchange Rate
Real
exchange
rate, <
Real
exchange
rate,
O (A)
(B)
(C)
S₁-1 S₂-1
O (D)
NX, NX.
(C)
S-1₂ S-1₁
NX
Net exports
(B)
exchange
rate, < S-16) S-16)
X
NX
NXNX Net exports
NX₂
NX₁
Net exports
NK, NK,
Which of the figures displays the impact of protectionist trade policies on the real exchange rate?
NX
Net exports
Real
Real
exchange
rate,
S-1
(D)
NX
1
Transcribed Image Text:In a small open economy model, when every foreign country reduces government spending in their economies, the equilibrium real exchange rate (e): TIP: draw the plot (with net exports and net capital outflows) and move the appropriate line. O rises, and home country net exports fall. O rises, and home country net exports rise. O falls, and home country net exports fall. O falls, and home country net exports rise. Policies that Influence Real Exchange Rate Real exchange rate, < Real exchange rate, O (A) (B) (C) S₁-1 S₂-1 O (D) NX, NX. (C) S-1₂ S-1₁ NX Net exports (B) exchange rate, < S-16) S-16) X NX NXNX Net exports NX₂ NX₁ Net exports NK, NK, Which of the figures displays the impact of protectionist trade policies on the real exchange rate? NX Net exports Real Real exchange rate, S-1 (D) NX 1
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