Finance What happens to the value of the dollar if the bank of japan increase its money supply and lower interest rates? How will this impact the value of the dollar, exports, and imports, AD and GDP?
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- 3. What impact will budget deficits have on the exchange rate value of the dollar? How will this impact net exports and aggregate demand? Explain4. How does a decrease in foreign price levels affect domestic aggregate expenditures and demand?(iii)Explain what is meant by the current account multiplier in relation to a fiscal expansion, giving the appropriate equation.
- ONLY answer! NO explanation! 1. Which of the following statement is true?a) Investment tax incentive increases investment, which increases productivity growth and living standards in the long run.b) Budget deficit reduces investment, which reduces productivity growth and living standards.c) Both investment tax incentive and budget deficit causes net exports to falld) all of the above 2. Which of the following caused a trade deficit in the USA during 1990s?a) Although national saving increased in the 1990s, investment increased even at a faster rate.b) Slowdown in national savings but a rapid increase in investment.c) Huge government deficit.d) An increase in government spending. 3. Let the govt. removed previous tax incentive for investment. What kind of effect will this have on the real interest rate?a) The real interest rate will remain unaffected.b) The real interest rate will increase.c) The real interest rate will decrease.d) No effect. 4. Following the previous question, what…59 please quikcly thanks ! If the Bank of Canada raises its target for the overnight interest rate from 3 percent to 3.25 percent while interest rates in other countries do not change, the result is _____ of financial capital, _____ in demand for Canadian dollars and _____ of the Canadian dollar. a.An outflow; an increase; an appreciation. b.An inflow; an increase; a depreciation. c.An inflow; an increase; an appreciation. d.An outflow; a decrease; a depreciation. e.An inflow; a decrease; a depreciation.D4) FinanceImagine that the economy is at a point that is below both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE? The exchange rate will first increase to a point on the AA schedule. The exchange rate will first move to a point on the DD schedule. The output will directly decrease. The output will directly increase. The economy will stay at this level in the short run.
- Explain the relationship between a current account deficit or surplus and the flow of funds.If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.6. In a small open economy undertaking a fiscal contraction, the real interest rate should: rise fall stay the same move by the same amount as the exchange rate
- 1. Under what circumstances will a domestic fiscal policy expansion be successful in increasing GDP if a fixed exchange rate is maintained? When will it be unsuccessful? Illustrate with the IS/LM/BP graph. 2. What is the effect on Country A’s macro economy of the adoption of an expansionary monetary policy by the rest of the world in a world of fixed exchange rates?Write out the equation for desired national savings. What changesto desired national saving and desired national consumption happen whengovernment spending increases, funded by an increase in taxes? Why doesconsumption change by less than G?4. In your macroeconomic lectures you are often told that exchange rates and interest rates are important for macroeconomic decision-making. How does an increase in Japan’s government budget deficit affect each of the following? i. The real interest rate in the short run in Japan. Explain. ii. Private domestic investment in plant and equipment in Japan.