3. (a) Using appropriate diagrams, explain the derivation of BT curve. (b) Using AD-BT-ERU and WS-PS diagrams, analyze the following shocks to the equilibrium employment, real exchange rate, trade balance, and real wage (W/Pc). (i) A rise in the tax wedge. (ii) A decline in autonomous investment.
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- 8) For this question, assume that the economy is operating in a fixed exchange rate regime and that perfect capital mobility exists. Given this information, which of the following will occur? A) The domestic and foreign interest rates must be equal. B) The central bank cannot use monetary policy to affect domestic output. C) An expansionary fiscal policy will require that the central bank increase the money supply. D) all of the above E) none of the aboveCOURSE: MACROECONOMIC - MUNDELL-FLEMING MODEL Until mid-2005, the Central Bank of China established a fixed exchange rate between its currency (yuan) and the dollar. The fixed exchange rate regime was reintroduced during the Great Recession between July 2008 and June 2010.After that date, the Chinese central bank established fluctuation bands for the yuan allowing it to move within these bands. However, the US has accused China on several occasions of taking actions to devalue its currency against the dollar.EXPLAIN and GRAPH with an open economy model with a fixed exchange rate (MUNDELL-FLEMING MODEL) the different chain effects that are generated when a country devalues its currency. From your results DETERMINE why it would be convenient for China to devalue its currency with respect to the dollar and in what way USA is harmed. Hint: according with statement on first paragrah, explain what's happens if devaluation process is defined and by Mundell-Fleming Model explain differents…9 Please identify each of the following the statements as true/false/uncertain and support your claim 1. The financial market expects the Canada-US nominal exchange rate to appreciate . S0 the current nominal interest rate in Canada is higher. 2. A temporary adverse supply shock will shift the LM curve up to the left, resulting a higher interest rate and lower aggregate output temporarily.
- How would a contractionary monetary policy affect the exchange rate, net exports, aggregate demand, and aggregate supply?Subject: Apply Mundel-Fleming Model Explain with the Mundell-Fleming Model under flexible exchange rate and perfect capital mobility the different chain effects that would be generated if the business confidence index in Chile falls permanently due to changes in the project for a new constitution of the republic. How would the results obtained change if analyzed over long periods of time through an Aggregate Supply (AS) and Aggregate Demand (AD) model?1 Suppose that due to a fall in the world interest rate, the equilibrium consumption of trad- ables, CT (r∗, QT1 , QT2 ), increases by 10 percent. Assume that prior to the fall in the world interest rate the economy was operating at full employment. Show that the equilibrium real wage also increases by 10 percent. Show that this result is independent of the exchange rate arrangement. To answer this question, you can use a graphical or a mathematical approach.
- European Central Bank will keep its aggressive monetary stimulus that is, expansionary monetary policy in place, where as US will not continue to do so. "With the help of an equation", explain the effect of this on the long run depreciation of the US dollarEconomics n the exchange rate model with short-run price stickiness, the nominal interest rate decreases immediately if there is a permanent increase in money supply. However, the model of monetary approach to the exchange rate suggests that the interest rate rises when there is a permanent increase in the growth rate of money supply. Explain how the different assumptions in these two models lead to contrasting predictions about the response of interest rates to the money supply. Show the relevant long-run time paths of the interest rate, price level and nominal exchange rate inBusiness executives and policymakers are often concerned about the competitiveness of Pakistani industry (the ability of industries to sell their goods profitably in world markets). i. How would an increase in the nominal exchange rate ($/Rs) affect competitiveness in the short run? Explain. ii. Suppose you wanted to make domestic industries more competitive but did not want to alter aggregate income. According to the Mundell–Fleming model, what combination of monetary and fiscal policies should you pursue? Graphically explain.
- 4. Russia-Ukraine conflict.4.1 Suppose this incidence affects Russia’s economy as followed: (1) a sharpreduction in net-export (NX) in the short-run and (2) a decline in capital stock in the long- run. With the aid of AD & AS diagram, elaborate the impacts on both price level and quantity level in Russia (including adjustment process), both in short-run and long-run. 4.2 After the incidence, Russian government wishes to restore the economy back to normal (prior to the conflict). Which policies should the Russian government impose? State the policies. With the aid of AD & AS diagram, elaborate how the initial (prior to the conflict) equilibrium is restored (including adjustment process), both in short-run and long-run.Japan has a flexible exchange rate system. It experienced multiple lockdowns in 2021 due to COVID-19. Please use appropriate diagrams to explain what policy measure(s) Japan may undertake to maintain full employment: 1) if foreign demand is constant; or 2) if foreign demand declines.QUESTION THREE The Zambian economy has been facing escalating inflationary amid weakening of the Zambian Kwacha. In an attempt to arrest the situation, Dr. Kalyalya and his Monetary Policy Committee have been tightening monetary policy through rising the policy rate and statutory reserve. Assuming the Zambian can be modelled using the IS-LM-BOP Model, discuss and show the effects of these actions on the Zambian Economy under the current Exchange Rate Regime and External Sector policies. NOTE: Be sure to show all relevant graphs, shifts of curves, changes to important variables. EXPLAIN. Provide both graphs and full explanation.