In the Mundell-Flemming model with floating exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance if a quota on imported cars is implemented. Examine what would happen if exchange rates were fixed rather than floating?

Q: Examine how surpluses and deficits in the balance of payments (BOP) affect exchange rates.

A: Introduction - All central bank transactions are recorded in the account on the balance of payments…

Q: How does the government intervene in the fixed exchange rate to keep it stable? Explain your answer…

A: Fixed exchange rate A fixed exchange rate is a type of exchange rate system in which a monetary…

Q: Explain why in case of a fixed exchange rate regime temporary and permanent fiscal policy changes do…

A: A fixed exchange refers to when the value of a country's currency is fixed against foreign…

Q: The demand curve for a currency will typically slope down, because, for a given future value of a…

A: The demand for a foreign currency occurs as people have to pay for the imported goods. Another…

Q: Is monetary approach an automatic adjustment mechanism to correct a deficit in the balance of…

A: The exchange rate is the rate at which the currencies of two countries can be traded for each other.…

Q: An exchange rate is best described as? A)The price of goods in terms of a foreign currency B)The…

A: Exchange rate is are of two types: Fixed exchange rate and Flexible exchange rate. Fixed exchange…

Q: Would a domestic period of very high inflation make it easier or more difficult for a country to…

A: Answer to the question is as follows:

Q: Please explain flexible and fixed exchange rates. Show ways to maintain a strong or a weak currency

A: Flexible exchange rate A flexible exchange rate, also known as a floating exchange rate, fluctuates…

Q: Developing countries like China and India start promoting investment. Use the Mundell-Fleming model…

A: The great degree of integration or connectivity among financial or capital markets is one of the…

Q: n the flexible exchange rate regime, the equilibrium exchange rates are determined by demand and…

A: The exchange rate is the rate at which the currency of one country can be exchanged for another…

Q: If the Federal Reserve raises interest rates, what would happen to thepeso-dollar exchange rate in…

A: The rise in the interest rate of a country makes its investment attractive. Thus, a rise in the…

Q: How can a nation in a flexible exchange rate regime correct the problems of inflation, recession and…

A: A Flexible Exchange rate is defined as a regime where the currency of a country is set by the…

Q: explain the determination of exchange rate using the interest parity approach .

A: Answer: According to the interest parity approach, the forward exchange rate (expected exchange…

Q: If a government of a country with a zero trade balance increases its budget deficit, then what will…

A: Import/export imbalances can be a decent or a terrible sign for an economy, and exchange excesses…

Q: what is the assignment problem

A: The objective of the assignment problem is the allocation of resources to an equal number of…

Q: In the Mundell–Fleming model with floating exchange rates, explain what happens to aggregate income,…

A: Mudell - Fleming model - This model is extension of IS-LM model . This model evaluate IS-LM model in…

Q: Discuss the strong and weak points of the flexible exchange rate system? What are the strong and…

A: The exchange rate is the rate that is used to exchange one national currency for another.

Q: If the exchange rate were fixed rather than floating, explain what would happen to The trade…

A: Goods market equilibrium, IS curve: Y = C (Y – T) + I (r* ) + G – NX(e) Money market equilibrium, LM…

Q: Show using the Mundell-Fleming model how an increase in tariffs would affect the nominal exchange…

A: Mundell-Fleming model is the extension  of IS-LM model in the run, that is explained as follows.

Q: Which of the following is true? A. Exchange rate pass-through is a measure of the response of…

A: (Q) Which of the following is true? A. Exchange rate pass-through is a measure of the response of…

Q: Why do nations use a crawling peg exchange rate system? What role does speculation play in this…

A: Exchange Rate System: The exchange rate system is the system in which an exchange rate is determined…

Q: If in a country the tariff rates rises and at the same time the personal income tax rates in the…

A: If there is an increase in tariff, it makes the foreign goods costly. This will motivate the local…

Q: Y = C (Y – T) + I (r* ) + G – NX(e) M/P = L(r*, Y) %3D a) If the taxes are raised in this economy,…

A: The fiscal policy is involved with the policy of the taxes, government expenditure. The fiscal…

Q: If a £ is cheaper in terms of a foreign currency than the equilibrium exchange rate, a exists at the…

A: If a £ is cheaper in terms of a foreign currency than the equilibrium exchange rate, a…

Q: Please provide a short and concise answer to the following question: Why are exchange rates…

A: Exchange rate is the rate at which nation's currency are exchanged . Foreign exchange is used to…

Q: Consider the foreign exchange market. Suppose there is an increase in domestic income. Then, the…

A: Answer 1- Expanding terms of career expos' more noteworthy interest for the nation's products. This,…

Q: When the exchange rate rises, the demand curve for foreign exchange shifts and the supply curve of…

A: DISCLAIMER  “Since you have asked multiple question, we will solve the first question for you. If…

Q: Given the definition of the exchange rate , if the Canadian dollar is the domestic currency and US…

A: The exchange rate between two currencies is the price of one currency in terms of another currency.…

Q: The advantage of a system of fixed exchange rates over one where exchange rates are flexible is that…

A: Fixed Rate System. In a fixed exchange rate system, the value of a currency is locked into (pegged)…

Q: In the Mundell–Fleming model with floating exchange rates, explain what happens to aggregate income,…

A: Mundell Fleming model shows the short run relationship between a country’s interest rate, nominal…

Q: What is the logic behind the theory of purchasing-power parity? What does purchasing-power parity…

A: The purchasing power parity theory suggest that the exchange rate of the currencies is equal to the…

Q: chasing power parity may not fully explain exchange rate

A: Option (c). When a fresh student starts looking for job, he enter labor force and is unemployed.…

Q: Fixed Exchange rate is too expensive to be implemented," do you agree? Explain.

A: A fixed exchange rate, sometimes known as a pegged exchange rate, is an exchange rate regime in…