nflation and international trade Identify which statements are true and which ones are false. For all statements, briefly explain why they are true or false. a) Economists projected inflation rate to be 4% in 2022 in country X. In reality, inflation rate was 7%. Borrowers in country X are better off. b) The government in country X decided to print more money and give transfers of $1,000 to citizens who recently retired. It will cause a decrease in money supply, so the value of money will increase, and prices will decrease. c) Countries X and Y are neighbors. When the government in country X decides to print more money, the value of currency of country Y increases, so this currency appreciates, while the currency of country X depreciates. d) Budget surplus in country X causes a shift of the supply curve for loanable funds to the left, so the real interest rate increases. Then, the net capital outflow decreases, and hence the real exchange rate decreases
Inflation and international trade
Identify which statements are true and which ones are false. For all statements, briefly explain
why they are true or false.
a) Economists projected inflation rate to be 4% in 2022 in country X. In reality, inflation rate
was 7%. Borrowers in country X are better off.
b) The government in country X decided to print more money and give transfers of $1,000 to
citizens who recently retired. It will cause a decrease in money supply, so the value of money
will increase, and prices will decrease.
c) Countries X and Y are neighbors. When the government in country X decides to print more
money, the value of currency of country Y increases, so this currency appreciates, while the
currency of country X depreciates.
d) Budget surplus in country X causes a shift of the supply curve for loanable funds to the left,
so the real interest rate increases. Then, the net capital outflow decreases, and hence the real
exchange rate decreases
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