Is the following true, false or uncertain? In a 2-bloc world economy with flexible exchange rates, the same inflation shock affects both blocs. Tighter monetary policy in each bloc produces exchange rate appreciation
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Is the following true, false or uncertain? In a 2-bloc world economy with flexible exchange rates, the same inflation shock affects both blocs. Tighter
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- What are two ways in which monetary policies and tight budgets allow a fixed exchange rate system to be successful?Compare the effects of monetary and fiscal policies (i.e. strengthened or weakened) to maintain internal balance(s) of an open economy under fixed and floating exchange rate regimes.Q3-1 In a situation of flexible exchange rates, other things equal, a shift of the IS curve to the left will lead to ______ of the country's currency if the BP curve is steeper than the LM curve and will ______ of the country's currency if the LM curve is steeper than the BP curve. Select one: a. an appreciation / also lead to an appreciation b. an appreciation / lead to a depreciation c. a depreciation / lead to an appreciation d. a depreciation / also lead to a depreciation
- A country has been experiencing a persistent deficit in its current account balance due to high levels of imports compared to exports, along with significant outflows of income payments and transfers. To address this issue, the government is considering implementing a range of policies, including devaluation of the currency, imposition of tariffs, and promotion of export industries. The goal is to correct the balance of payments imbalance and improve the country's international financial position. The question is: In this scenario, the primary objective of the government's policies is to: A) Increase the country's reliance on imports B) Decrease foreign investment in the country C) Correct the balance of payments deficit D) Eliminate all forms of international tradeThis is all one question, please answer everything! Explain how each of the below affect Sweden's balance of payments. Please choose the correct answer between the options presented: Oil exports to the rest of the world decreased due to stay at home orders: current account moves toward (surplus/current) account moves toward (deficit/capital) (financial) account moves toward (surplus/capital) (financial) account moves toward deficit Due to Brexit, Sweden imports of British goods decreases: current account moves toward (surplus/current) account moves toward (deficit/capital) (financial) account moves toward (surplus/capital) (financial) account moves toward deficit Swedish laborers working outside of Europe see a decrease in their incomes, and thus there is a decrease in remittances: current account moves toward (surplus/current) account moves toward (deficit/capital) (financial) account moves toward (surplus/capital) (financial) account moves toward deficit Fewer Swedans travel outside…In a fixed exchange rate regime, which of the following policies could lead to a greater trade deficit and leave aggregate demand constant? A) Devalue the currency. B) Increase government spending. C) Decrease government spending. D) Decrease government spending and devalue the currency. E) Increase government spending and revalue the currency.
- We look at the trade of gas between Russia and the EU and assumes that both areas' supply curves slope upwards and their demand curves slope downwards in the diagram with quantity on the horizontal axis and price on the vertical axis. To make the situation simple, we also initially assume that the exchange rate is constant, and it is 1 (so that we do not need to differentiate between the prices i Russia and the EU). In the autarky equilibria, prices are higher in the EU than in Russia. Unless otherwise specified, there are no trading costs, and the capacity of the pipelines is not binding (ie with free trade the prices are basically the same in the EU and Russia). (a) Draw and show the supply of export goods and the demand for import goods in relation to the two areas' supply and demand curves (three islands next to each other). (b) What happens (to welfare in the two countries and consumer surplus/producer surplus) if the EU stops importing Russian gas? (c) Without Nord Stream 1/2 in…In the monetary small open-economy model, suppose that money supply equals 100. The money demand function takes the form Md=P(0.5Y-400r). The foreign price level P* is 1. The equilibrium output Y is 200 and the world interest rate r* is 0.2. (a) If foreign price rises by 50%, what will be the percentage change in the equilibrium exchange rate? In this case, we assume that money supply is fixed at 100.(b) If the country wishes to stabilize the exchange rate, what will be the new money supply if foreign price rises by 50%?Describe the factors that affect saving and investment and determine the current account balance in a small open economy.
- In 1992, 18.6 million Canadians visited the United States, but only 11.8 million U.S. residents visited Canada. By 2002, roles had been reversed: more U.S. residents visited Canada than vice versa. Why did the tourism reverse direction? Canada didn’t get any warmer from 1992 to 2002 – but it did get cheaper. The reason is a large change in the exchange rate: in 1992 Canadian dollar was worth $0.80, but by 2002 it had fallen in the value by 20% to about $0.65. This means that Canadian goods and services, particularly hotel rooms and meals, were about 20% cheaper for Americans in 2002 compared to 1992. American vacations had become 20% more expensive for Canadians. Canadians responded by vacationing in their own country or in other parts of the world. Foreign travel is an example of a good that has a high price elasticity of demand: elasticity=4.1. One reason is that foreign travel is a luxury good for most people – you may regret not going to Paris this year, but you can live…An economy with a strong export sector has been accumulating large surpluses in its current account. While this indicates a competitive export sector, it also leads to appreciation of the domestic currency, making exports more expensive and imports cheaper. This situation could potentially harm domestic industries and create economic imbalances. The government is contemplating measures to manage the current account surplus and maintain economic stability. The question is: In this scenario, the government's intervention should primarily focus on: A) Continuously increasing the current account surplus B) Managing the current account surplus to prevent economic imbalances C) Restricting all forms of imports D) Devaluing the domestic currencyHow and why will switching from a flexible to fixed exchange rate regime affect exports as a percentage of GDP/ Exports-GDP-ratio