Problem 4. Equilibrium interest rate and exchange rate.( Using the framework relating money supply/demand to interest rates presented in the textbook, for each of the following events (i) determine graphically its effect of either money supply or money demand and its direct effect on the equilibrium interest rate; (ii) mention the effect that the movement in the interest rate would have on capital outflows/inflows and (iii) explain its impact on the exchange rate. a) As a result of the Great Recession, the central bank implements a quantitative easing strategy and buys government bonds. b) Real GDP is below the full employment level, government decides to decrease taxes. c) The central bank decreases the growth rate of the money supply. d) The war in Russia causes all kind of consumer prices to risc.

Problem 4. Equilibrium interest rate and exchange rate.( Using the framework relating money supply/demand to interest rates presented in the textbook, for each of the following events (i) determine graphically its effect of either money supply or money demand and its direct effect on the equilibrium interest rate; (ii) mention the effect that the movement in the interest rate would have on capital outflows/inflows and (iii) explain its impact on the exchange rate. a) As a result of the Great Recession, the central bank implements a quantitative easing strategy and buys government bonds. b) Real GDP is below the full employment level, government decides to decrease taxes. c) The central bank decreases the growth rate of the money supply. d) The war in Russia causes all kind of consumer prices to risc.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 6PA

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