Japan has a flexible exchange rate system. It experienced multiple lockdowns in 2021 due to COVID-19. Please use appropriate diagrams to explain what policy measure(s) Japan may undertake to maintain full employment: 1) if foreign demand is constant; or 2) if foreign demand declines.
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Japan has a flexible exchange rate system. It experienced multiple lockdowns in 2021 due to COVID-19. Please use appropriate diagrams to explain what policy measure(s) Japan may undertake to maintain full employment: 1) if foreign
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- Explain how permanent shifts in national real money demand functions affect real and nominal exchange rates in the long run.Consider the relationship among exchange-rate changes, aggregate demand, and monetary policy. Assume we begin in a situation with real GDP equal to Y∗.Y*. Suppose the world price for raw materials rises because of growing demand for these products. Given that Canada is a net exporter of raw materials, what is the likely effect on Canadian aggregate demand? Show this in an AD/AS diagram (assuming no change in the exchange rate). Suppose instead that there is an increase in the demand by foreigners for Canadian financial assets such as government bonds. What is the direct effect on Canadian aggregate demand? Show this in an AD/AS diagram (assuming again no change in the exchange rate). Both of the shocks described above are likely to cause an appreciation of the Canadian dollar on foreign-exchange markets. As the Canadian dollar appreciates, what are the effects on aggregate demand in part (a) and in part (b)? Show these “secondary” effects in your diagram and explain. Given your…For this question, let it represent the interest rate on the U.S. one-year discount bond, i ∗ t represent the interest rate on the British one-year discount bond, and E represent the dollar price of the British pound. Assume that policy makers are pursuing a flexible exchange rate regime, and that P is fixed (therefore, ignore any AS/AD analysis.) (a) Suppose the Fed decides to increase the money supply. Based on your understanding of the market for foreign exchange, graphically illustrate and explain what effect this expansionary monetary policy will have on the market for foreign exchange and on the exchange rate (E). (b) Now, suppose there are two countries identical in every way with the following exception: country A is closed in terms of both the goods and financial markets while country B is open with a flexible exchange rate regime. Further suppose that the central banks in both countries increase the money supply by the same amount. Briefly explain the extent to which, if…
- Consider an economy that is initially at full employment level. In order to advance the state of technology, suppose that the government starts investing in research and development programs, and gives tax breaks to firms who invest in technology and innovation. Using the IS-LM-PC model for a closed economy, discuss the effects of these policy changes: in the short-run; and in the medium-run with a central bank policy rate adjustment. Your discussion should make explicit reference to diagrams that illustrate adjustment dynamics.Using the short-run model of FX, carefully explain the link between the budgetary crisis in Venezuela, driven by the decline in oil prices and the depreciation in the Venezuelan exchange rate. (Diagram required).The U.S. dollar is still considered the most traded and the most stable currency in the world. It is easily converted over to other currencies when trading and is also the official currency of several U.S. territories. However, a strong U.S. dollar has both advantages and disadvantages. One of the advantages that was already mentioned is that the conversion of the U.S. dollar over to other countries is fairly easy and grants it a greater degree of buying power for foreign products. This also makes foreign imports cheaper not to mention investors benefit when engaging in FDI. The disadvantages of a strong U.S. dollar is that it makes it more expensive for foreign countries to import products from the U.S., which negatively affects industries and business owners within that country as a result. It can even negatively affect the U.S. because those that conduct business internationally will technically earn less from foreign sales if their currency is not fully convertible. Overall, even…
- The U.S. dollar is still considered the most traded and the most stable currency in the world. It is easily converted over to other currencies when trading and is also the official currency of several U.S. territories. However, a strong U.S. dollar has both advantages and disadvantages. One of the advantages that was already mentioned is that the conversion of the U.S. dollar over to other countries is fairly easy and grants it a greater degree of buying power for foreign products. This also makes foreign imports cheaper not to mention investors benefit when engaging in FDI. The disadvantages of a strong U.S. dollar is that it makes it more expensive for foreign countries to import products from the U.S., which negatively affects industries and business owners within that country as a result. It can even negatively affect the U.S. because those that conduct business internationally will technically earn less from foreign sales if their currency is not fully convertible. Overall, even…Multinationals generally have production plants in a number of countries. Consequently, they can move production from expensive locations to cheaper ones in response to various economic developments– a phenomenon called outsourcing when a domestically based firm moves part of its production abroad. If the dollar depreciates, what would you expect to happen to outsourcing by American companies? Explain and provide an example.Suppose that the Fed pursues an expansionary monetary policy by pushing real interest rates down, other things constant. Assume the policy is unanticipated: a We should expect real investment spending to rise b We should expect real consumption spending on durables to fall c We should expect stock prices to fall d We should expect the U.S. dollar exchange rate to appreciate
- Ghana cedi is the best performing currency against US dollar’ – BawumiaThe cedi is the best performing currency in the world against the US dollar. This is according to Vice President Dr. Mahamudu Bawumia.The cedi depreciation, which has been a major problem in the country over the years, has even led to the inauguration of the FX Development Committee to tackle issues relating to the depreciation of the cedi and find solutions to them.The cedi last year depreciated by more than 12.7 percent, the worst performance since 2015 when the cedi depreciated by more than 14.6 percent.But commending the governing New Patriotic Party (NPP) for the good work done in sustaining the cedi at the Town Hall meeting held at Kumasi on Tuesday, the Vice President said there has been a major change in the cedi’s performance since the NPP got into power.“Indeed for us, if the cedi is to match what the NDC record is, in terms of the nominal change in the currency, we’d have to do a quadruple jump which…With aid of a diagram, explain the impact of the devaluation of the Dominican Republic dollar on the price of imported raw material on aggregate Supply and Gross Domestic Product (GDP) in the economyWhat is the impact of the fall in Canadian interest rates? a. an appreciation of the dollar and smaller net exports b. a depreciation of the dollar and greater net exports c. an appreciation of the dollar and greater net exports d. a depreciation of the dollar and smaller net exports