In the case of incomplete capital movements in the flexible exchange rate system, explain the effectiveness of a "constricting" monetary policy by drawing, for the situation where the demand for money is more sensitive to interest than capital movements.

Q: Under a fixed exchange rate regime, how does increase in GDP effect the domestic money market…

A: Under a fixed exchange rate system, expansion in GDP impact the domestic currency market harmony…

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: Empirical studies find that exchange rates are much more variable than inflation differentials. How…

A: The exchange rate refers to the relative value of a currency in terms of other foreign currencies.…

Q: Explain the assumptions that "central banks cannot follow independent monetary policies in a fixed…

A: Fixed exchange rate system refers to the system in which the exchange rate of currency has been…

Q: Economists sometimes say that the current exchange rate system is a dirty float system. What does…

A: In the international market, exchange rate is determined under two different systems such that fixed…

Q: Use the diagrammatic analysis of simultaneous equilibrium in the money market and the foreign…

A: The sticky-price monetary model assumes that short-run goods prices are sticky, and that PPP holds…

Q: e e

A: Monetary policy involves management of rate of interest and supply of money.It is the economic…

Q: Explain why, when assuming imperfect competition with non-homogenous goods and unemployment, the…

A: Introduction Macroeconomics is a subfield of economics that examines an economy's overall…

Q: Explain how the flexible exchange rate may be use to correct disequilibrium within an economy.

A: A flexible exchange rate system is a system in which the value of the exchange rate is determined by…

Q: Assume that we are in a floating exchange rate regime. The price of oil went up, driving the economy…

A: In the IS-LM-BP Model, we differentiate between perfect capital mobility and imperfect capital…

Q: Suppose there is a contractionary monetary policy. Graph and explain this policy's short- run and…

A: Monetary policy is the policy to maintain the money supply in the economy for stability and to avoid…

Q: Is expansive monetary policy possible, if a country has a floating exchange rate

A: A floating exchange rate is when the value of a currency depends upon the demand and supply of the…

Q: According to the simple monetary model, money is growing at 5% in the United States and 6% in the…

A: The foreign exchange market serves as a worldwide marketplace where currency exchange rates are…

Q: Given that the country has a floating exchange rate regime, what are the consequences of a policy…

A: As a result of expansionary monetary policy, the LM shifts rightwards and the output and interest…

Q: approach to exchange rates. WH callod a long-run modol? riun

A: An exchange rate is the value of one country's currency in relation to another country's or economic…

Q: Suppose the foreign country is experiencing a recession that reduces foreign output, Y*. To…

A: The money supply expands, interest rates fall, and demand rises when a central bank uses its tools…

Q: “If a country wants to keep its exchange rate fromchanging, it must give up some control over its…

A: The exchange rate is basically the value of a country's currency compared to the currency of other…

Q: how nominal and real exchange rates are determined, in both the short runand the long run.

A: The nominal exchange rate tells how much foreign currency can be exchanged for a unit of domestic…

Q: Explain how the exchange-rate transmission mechanism can strengthen the interest-rate transmission…

A: The Monetary Policy is defined as a policy which is used by the government to control a nations…

Q: Explain why permanent monetary expansion has a larger effect on output than temporary monetary…

A: In a country if  the currency price of a nation is set by the foreign exchange market based on…

Q: Derive and explain the monetary approach to exchange rate determination

A: Exchange rate system in a country could be fixed, floating and managed floating.  The fixed system…

Q: How does a country’s decision to fix its exchange rate to that of another nationshape the conduct of…

A: The fixed exchange rate/pegged exchange rate is the regime in which the worth of the exchange rate…

Q: Explain why a country with fixed exchange rate and open financial markets has to give up its…

A: The theory that depicts that countries might tend to choose among options while making decisions…

Q: Compare and discuss the effectiveness of monetary policy BOTH under Floating Exchange Rate System…

A: Monetary policy under floating exchange rate: Expansion of monetary policy is quite effective. When…

Unemployment and Cost of Unemployment

Unemployment is the state of being unemployed, even when an individual is actively seeking work opportunities. The unemployment rate refers to the percentage of the workforce that is currently unemployed.