MACROECONOMICS
10th Edition
ISBN: 9781319106072
Author: Mankiw
Publisher: MAC HIGHER
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Question
Chapter 13, Problem 9PA
(a)
To determine
The exchange rate system that the Country U has with its trading partners.
(b)
To determine
The policy of government during recession to simulate employment.
(c)
To determine
The impact of prohibition of import of wines from State W.
(d)
To determine
The different feature of State C’s economy from Country C’s economy.
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Students have asked these similar questions
(a) There are two countries in the world, Australia and Japan. Suppose that the central bank of Australia lowers the real interest rate, while the central bank of Japan raises the real interest rate. In this case, the nominal exchange rate (Yen/Dollar) increases.
Answer true or false. Please briefly explain your answer.
(b) Argentina is an open economy. Suppose that Argentina fixes the value of their currency to US dollars. If Argentina experiences hyperinflation, it can stabilize inflation by using its monetary policy freely.
Answer true or false. Please briefly explain your answer.
Suppose that the central bank decreases the tax rate. What happens to the output (Y), real interest rate (r), exchange rate (e), investment (I), and net export (NX) under the following model environment? (Note: (1) The exchange rate e is the amount of foreign currency per unit of domestic currency. (2) Explain your answers using the graph/figure.)
Short-run closed economy.
Short-run small-open economy (Floating exchange rate).
Short-run small-open economy (Fixed exchange rate).
Short-run large-open economy (Floating exchange rate).
Long-run closed economy.
The following question focuses on the exchange rate between Mexican pesos and U.S. dollars, defined as the number
of Mexican pesos you must pay for one dollar.
Suppose that incomes decrease in Mexico, causing Mexican consumers to purchase fewer U.S.-made goods and
services. How does this affect the peso-dollar exchange rate? Drag the appropriate curve(s) on the following graph to
illustrate how this change affects the market for dollars.
Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move the curve and
it snaps back to its original position, just try again and drag it a little farther.
EXCHANGE RATE (Pesos per dollar)
Supply
Demand
FOREIGN EXCHANGE IMIlions of dollars)
A decrease in incomes that causes Mexican consumers to buy fewer U.S.-made goods and services will cause the
Mexican peso to
relative to the dollar,
appreciate
depreciate
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