Answer the question according to the graph below.Dollar/euro exchangerate, EseEseDollar returnDollar returnEe2'EeExpectedeuro returnExpectedeuro return3'1'EdeRates ofreturn (indollar terms)RR RL(Rg. Yus)L(Rg. Yus)MusPisU.S. real4money supplyMusPus2.U.S. realU.S. realmoney holdingsmoney holdingsAssume that the U.S. money supply is initially given at M'us, the price level is initially given atP'us, and the equilibrium exchange rate is initially at E's/e.A permanent increase in the nominal money supply from Mus to M²us in the long-run willresult in a new equilibrium at pointLütfen birini seçin:O A. 4'O B. 1'O C. 2'O D. 3'

The money supply is the total amount of money available in the economy. The money supply is…

Dollar/euro exchange rate, Ese Ege Dollar return Dollar return 2' - Ege 2' 4' Expected euro return Ee Expected euro return 3' Ede Rates of return (in dollar terms) R L(Rg. Yus) L(Rg. Yus) Mis PUs Pis U.S. real 4. money supply Mus Pus Mis 2 US U.S. real money holdings U.S. real money holdings Assume that the U.S. money supply is initially given at M'us, the price level is initially given at P'us, and the equilibrium exchange rate is initially at E's/e. A permanent increase in the nominal money supply from M-us to M²us in the long-run will result in a new equilibrium at point Lütfen birini seçin: O A. 4' O B. 1' O C.2' O D. 3'

Dollar/euro exchange rate, Ese Ege Dollar return Dollar return 2' - Ege 2' 4' Expected euro return Ee Expected euro return 3' Ede Rates of return (in dollar terms) R L(Rg. Yus) L(Rg. Yus) Mis PUs Pis U.S. real 4. money supply Mus Pus Mis 2 US U.S. real money holdings U.S. real money holdings Assume that the U.S. money supply is initially given at M'us, the price level is initially given at P'us, and the equilibrium exchange rate is initially at E's/e. A permanent increase in the nominal money supply from M-us to M²us in the long-run will result in a new equilibrium at point Lütfen birini seçin: O A. 4' O B. 1' O C.2' O D. 3'

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter26: Monetary Policy

Section: Chapter Questions

Problem 3P

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You have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible. What is the effect on the foreign exchangemarket (the $ market)? 12. What impact will this have on imports?A. increaseB. decreaseC. remains unchanged 13. What impact does the change in the exchangerate have on aggregate demand?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged 14. What happens to the aggregate supply curve?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged
Consider the following open economy model:C = CO + cYDYD= YI= I0. brNX = No - n¡Y + n2Yf + n3RM/P-Mo+mOY-mp.where AD = C + I + Go + NXDerive the multipliers for the closed and open economy and make relevant comparison betweenthem.What is the impact of Mo and Go on the equilibrium value of R. That is, discuss the role ofmonetary policy and fiscal policy on the real exchange rate.Suppose that country A is a small open economy. Discuss the following effects by the help ofrelevant figures. Discuss by your own words explicitly and briefly.(a) Contractionary Monetary Policy under fixed exchange rate regime and perfect capitalmobility.(b)Contractionary Fiscal Policy under flexible exchange rate regime and without capitalmobility.(c)Expansionary Monetary Policy under fixed exchange rate regime and imperfect capitalmobility if interest rates are more sensitive to the capital flows.(d)Expansionary Fiscal Policyunder flexible exchange rate regime and perfect capital mobility.
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Answer the following questions 1.a. Today many Central Banks around the World are thinking of increasing interestrates. Why? What could be the dangers of increasing those interest rates toomuch?1.b.What will happen to the trade balance and the real exchange rate of a smallopen economy when govemment purchases increase, such as during a war?Does your answer depend on whether this is a local war or a global war? Onthose grounds, In the current situation of the Russian invasion, what shouldhappen between the dollar and the Euro?
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Assume that an economy prefers an internal balance (Y = Y) to an external balance (NX = 0). Then the only aim of the economy is to keep the equilibrium output level at the level of potential output (Yf= 1500 units). Suppose that the IS and BP models for this economy are as the following. Please the the attached photo
Suppose that the long term interest rate are decreasing since there is anexpectation that the economy is delving into the recession. How that changemight aect the foreign exchange rate in the country? Discuss?
You have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible What is the effect on the foreign exchangemarket (the $ market)? 8. The exchange rate (the amount of foreigncurrency that a $ buys)?A. increaseB. decreaseC. remains unchanged 9. The U.S. dollar has?A. depreciatedB. appreciatedC. remained unchanged 10. The currency in the other country has?A. depreciatedB. appreciatedC. remained unchanged