3. Derive and explain the Marshall-Lerner condition. If the Marshall-Lerner condition does not hold, explain and show graphically the dynamics of the trade balance in response to a real appreciation.
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- Suppose the exchange rate between the South African Rand (R) and the United States Dollar ($) changed from R10 per $1 to R15 per $1. If domestic prices remain the same, what would be the effect of this situation on the Rand and South Africa's imports? Select one: a. A depreciation of the Rand, making South African imports from the United States more expensive b. A depreciation of the Rand, making South African imports from the United States cheaper c. The Rand would buy three times more goods than before the change occurred d. Appreciation of the Rand, making South African imports from the United States cheaper..Q.4 The Asian Development Bank (ADB) has warned that a BoP crisis is imminent in Pakistan, if its economy grows more than 3.8% annually without fixing economic imbalances. Pakistan will have to fix its exports and reduce dependency on imports to avoid the next balance of payments crisis. “In the current structural and product specialization circumstances, if Pakistan’s economy is to grow faster than 3.8% in the medium-term, external imbalances will occur,” the report warned. The ADB paper noted that since end-2017, the government has implemented a number of economic reforms to address the BOP crisis, including regulatory measures, reduced imports, increased interest rates, and allowed depreciation of the exchange rate to the US dollar by almost 33%. Despite significant currency depreciation, merchandise exports did not pick up significantly and Pakistan’s total debt and liabilities have risen sharply. On average, over the last decade, Pakistan had lost global market share with foreign…1. Explain in detail the the main assumptions behind the H-O (Heckscher-Ohlin) model. Which is an interesting form of trade that The H-O and other more recent trade odels assume?
- Suppose a country is experiencing a situation where output is above the full employment level of output and a trade deficit . Further , assume that the policy makers goals are to achieve full employment output and balanced trade . Given this information , what type of exchange rate and / or fiscal policy can be used to achieve simultaneously these two goals ? Explain .need answer . absuletly upvote !!!! 1) Consider the dollar-yen exchange market, where the exchange rate represents the dollar price of one yen. The US is the demand side of the market and Japan is the supply side. In each of the following cases determine whether the exchange rate increases or decreases: a) per capita income in the US increases b) per capita income in Japan increases c) US inflation is greater than Japan's inflation d) there is an increase in US interest rates.Does a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?
- What do international flows of capital have to do with trade imbalances?If the trade deficit of the United States increases, how is the current account balance affected?5 Discuss the drawbacks of primary-sector-intensive outward-looking trade policies. How did the Prebisch-Singer hypothesis critique such policies and support the implementation of import substitution industrialization (ISI) strategies? Also discuss the similarities and differences between export-oriented industrialization strategies versus ISI. Which of these policies would be assisted by an undervalued exchange rate? Explain
- Please fill in the last two columns using the following information: The expected US dollar-South African rand (R) exchange rate in one year’s time (Ee$/R) is $0.076 for one rand. Calculate the exchange-rate changes for the two spot rates provided below and enter each in column four. If interest parity holds, please write “yes” in the appropriate row of column five. If it does not hold, please write “no.” Interest Ratefor the Dollari$ Interest Ratefor the RandiR Spot Exchange Rate E$/R Exchange-rate change (to 3 decimal places) Interest paritycondition holds (Yes/No)? 0.015 0.065 0.075 0.015 0.065 0.080Using shifts in supply and demand curves, describe how a change in the exchange rate affects industry. Label the axes, and state the geographic, product, and time dimensions of the demand and supply curve you are drawing. Explain what happend to industry price and quanity by making specific references to the demand and supply curves . How can you profit from future shifts in the exchange rate? How do you predict future change in the exchange rate?Q2-8 The simple Marshall-Lerner condition would suggest that one of the following cases would produce a worsening of the trade balance if the country's currency depreciated. Which one?(The negative sign on elasticities is being ignored; also, assume that trade is initially balanced.) Select one: a. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.5 b. elasticity of demand for exports = 0.4; elasticity of demand for imports = 0.6 c. demand curve for exports is vertical; demand curve for imports is horizontal d. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.1
