Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world. Explain how this increase in interest rates will affect each of the following for the Country X. Investment  The international value of its currency  Exports

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world.

Explain how this increase in interest rates will affect each of the following for the Country X.

  1. Investment 
  2. The international value of its currency 
  3. Exports       

Using a correctly labelled aggregate demand and aggregate supply diagram, show how the change in investment you identified in part (a) will affect each of the following in the short run.

    1. Output                                                                            
    2. The price level                                                         

Identify one fiscal policy action that could counter the effect identified in part (b). Explain how this policy will affect each of the following.

    1. Output 
    2. The price level 
    3. Nominal interest rates      
    4. i. Identify one monetary policy action that could counter the effects identified in part (b).                                               
    5. ii. Using a correctly labelled money market graph, show how this policy     will affect nominal interest rates.  

last 2 questions was not answered 4 and 5 the previous questions was already answered 

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