MANKIW: PRINCIPLES OF MACROECONOMICS
8th Edition
ISBN: 9781337801782
Author: Mankiw
Publisher: CENGAGE L
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Chapter 19, Problem 6CQQ
To determine
The impact of increased investment on exchange rate and trade balance.
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A country has 4,000 in domestic savings and firms spent 4,140 on new plant and equipment. The national budget surplus is 60. What must the country’s trade balance be?
A government decides to introduce an expenditure-switching measure to reduce a balance of trade deficit. Which of the following is an expenditure-switching measure? Pick a,b,c, or d
A. A government subsidy to domestic producers
B. An increase in income tax
C. An increase in the rate of interest
D.A decrease in state benefits
The exchange rate between the United States dollar and the Japanese yen is determined in a flexible foreign
exchange market.
A. Assume that Japan is currently in a recession. What fiscal policy action could the Japanese government take
to eliminate the recession?
B. What would be the effect of the fiscal policy action identified in Part A on interest rates in Japan?
C. Draw a correctly labeled graph of the foreign exchange market for the United States dollar. Show on your
graph the impact of the change in interest rates identified in Part B on each of the following:
i. The supply of United States dollars
i. The equilibrium exchange rate of the United States dollar
D. What would be the effect of the change in the exchange rate identified in Part Cil on United States imports?
E. What would be the effect of the change in United States exports identified in Part D on United States
unemployment?
Chapter 19 Solutions
MANKIW: PRINCIPLES OF MACROECONOMICS
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