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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F146ba547-3393-4257-a101-1e7cee66946f%2F32deeb33-4408-44c5-b704-1d0f3c249f6c%2Fwpl32sk_processed.jpeg&w=3840&q=75)
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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