Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 32, Problem 6QCMC
To determine
The impact of increased investment on exchange rate and trade balance.
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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
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Chapter 32 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- Suppose policy makers want to increase net exports (NX) and keep output (Y) constant. Which of the following policies would most likely achieve this? A.an increase in government spending B.a real depreciation C.an increase in government spending and a decrease in the real exchange rate D.a decrease in the real exchange rate and a tax increasearrow_forward6arrow_forwardMexico and the United States are trade partners. Each country has a zero current account balance and is operating in long-run equilibrium. Assume that the inflation rate in the United States is slowing relative to Mexico's inflation rate. (a) How will the inflation rate change in the United States affect: (i) Mexico's demand for U.S. goods and services? (ii) net exports of Mexico? Explain. (b) Illustrate the impact of the change you identified in part (a) on a fully labeled AD–AS model for the economy of Mexico. Use arrows to indicate any changes in AD, real GDP, and price level. (c) Ceteris paribus, will the national income of the United States increase, decrease, or remain the same? (d) On side-by-side and fully labeled foreign exchange market graphs, illustrate the impact of the change in relative inflation on the supply of Mexican pesos and on demand for U.S. dollars. Use arrows to indicate the change in the equilibrium exchange rate for each currency.…arrow_forward
- According to the national savings and investment identity, if the government of the country of Apex were to run a larger budget deficit, then ... The trade surplus of Apex with its trading partners would increase Private firms could invest more in other countries. Investments in the country would increase Investment in the country may fallarrow_forwardMindTap - Cengage Learningarrow_forwardThe US typically imports (M) more goods and services than it exports (X). a. Explain what this means for both the US Current Account (CA) and Capital Account (aka the Financial Account) and how the US net International Investment Position (IIP) will be affected. b. Why is a CA deficit referred to as an “excess spending” problem? Who is the US borrowing from when it engages in this “excess spending”? [Hint: use the twin-deficit identity.]arrow_forward
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