Q.4Consider the following open economy IS curve equation:Y = C+I+G+ X - IMa. Ifnet exports (X - IM ) are negative then domestic exchange rate will appreciate.True/false? Explain your answer.b. From the above equation we may conclude that economy will be in equilibrium iff.S+T = I +G. True/false? Explain your answer.c. Explain Dutch decease and Marshal-Lerner condition (MLC). If MLC satisfied thenthere won't be any Dutch decease. True/false? Explain your answer

Given the IS curve equation - Y = C + I + G + X -IM Net exports are defined as a metric for a…

If net exports ( X – IM ) are negative then domestic exchange rate will appreciate. True/fal se? Explain your answer. From the above equation we may condlude that economy will be in equilibrium iff S+T = I +G. True/false? Explain your answer. Explain Dutch decease and Marshal-Lerner condition (MLC). IFMLC satisfied then there won't be any Dutch decease. True/false? Explain your answer

If net exports ( X – IM ) are negative then domestic exchange rate will appreciate. True/fal se? Explain your answer. From the above equation we may condlude that economy will be in equilibrium iff S+T = I +G. True/false? Explain your answer. Explain Dutch decease and Marshal-Lerner condition (MLC). IFMLC satisfied then there won't be any Dutch decease. True/false? Explain your answer

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter31: Open-Economy Macroeconomics: Basic Concepts

Section31.2: The Price For International transaction: Real And Nominal Exchange Rate

Problem 2QQ

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(a) An analyst argues that exchange rate movements depend on interest rate differentials (that is, the International Fisher effect), country-specific economic policy uncertainty measures and country-specific GDP growth rates. With this in mind, the analyst estimates the following model: Expected rate of appreciation of yen against the dollar(%)= =0.5[idollar(%) – iyen(%)]+0.5[idollar(%) – iyen(%)]2+0.2[σUS(%) – σJAP(%)]+ +0.2[σUS(%) – σJAP(%)]2+0.1[GDPJAP(%) – GDPUS(%)]. In this model, idollar(%) is the one-year interest rate in the US, iyen(%) is the one-year interest rate in Japan, σUS(%) refers to economic policy uncertainty in the US, σJAP(%) refers to economic policy uncertainty in Japan, GDPUS(%) refers to annual GDP growth in the US and GDPJAP(%) refers to annual GDP growth in Japan. Assume idollar=6%, iyen=4%, σUS=5%,σJAP=1%, GDPUS=2% and GDPJAP=1%. Calculate the expected rate of appreciation of the yen against the dollar. Explain your findings in no more than 200 words.…
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