Using the Aggregate Demand and Supply model, demonstrate the impact on the Korean economy of a set of tariffs imposed by Japan. Explain carefully with theory. Diagram required.
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Using the Aggregate
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- Answer the given question with a proper explanation and step-by-step solution. Suppose that εD = 0.70 and ε_D^F = 0.50 for a given country: Suppose that the foreign currency price of this country’s exports falls by 18% following a devaluation. What will happen to the quantity of exports?Explain in detail if the following statement is true or false: `"All else equal, a DECREASE in the terms of trade of period 2 (temporary shock) lowers consumption (C1) and the trade balance (TB1) in period 1." Use equations to support your answer. Show all your calculations and explain the intuition behind your results. Hint: See Chapter 4 of Schmitt-Grohe, Uribe and Woodford. need full explanationAD/AS model. Country A is an oil exporting country. The aggregate demand and supply functions are given as below: AD : Y = 710 − 30P + 5G+3Poil AS : Y = 10 + 5P − 2Poil where Y is real GDP, P is the price level, G is the government purchases, and Poil is the world price of oil. Write down the equilibrium condition. Solve for the equilibrium value of real GDP and the price level (hint: take G and Poil as known variables). Draw the AD/AS graph to show when Poil rises in the world market, what will happen the AD and SAS curves. Explain the price level effect and the output effect due to the change of the oil price.
- If Canada increase its export of lithium, in such a way that national exports would increase, would that actually increase Canadian output? Or would it be washed out through an equal increase in imports? Explain your reasoning."In an economy with a high dependency on imported oil, what is the likely macroeconomic impact of a sustained and significant increase in global oil prices? A) An immediate improvement in the trade balance due to Increased export revenues. B) A decrease in inflation as higher oil prices lead to reduced consumer spending. C) An increase in the general price level and potential deterioration of the trade balance. D) Stabilization of the currency value due to increased demand for domestic currency to purchase oil.Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate,” you must show how you arrived at your final answer. Japan and the United States are major trading partners and the exchange rate between the Japanese yen and the United States dollar is determined in a flexible foreign exchange market. (a) Assume real income increased in the United States. Draw a correctly labeled graph of the foreign exchange market for the yen, and show the effect of the increased real income in the United States on the equilibrium exchange rate for the yen. (b) Will each of the following increase, decrease, or stay the same as a result of the increase in the United States real income? (i) Japan’s net exports. Explain. (ii) Unemployment in Japan. Explain. (iii) Japan’s long-run aggregate supply (c) Assume instead…
- Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate,” you must show how you arrived at your final answer. Japan and the United States are major trading partners and the exchange rate between the Japanese yen and the United States dollar is determined in a flexible foreign exchange market. (a) Assume real income increased in the United States. Draw a correctly labeled graph of the foreign exchange market for the yen, and show the effect of the increased real income in the United States on the equilibrium exchange rate for the yen. (b) Will each of the following increase, decrease, or stay the same as a result of the increase in the United States real income? (i) Japan’s net exports. Explain. (ii) Unemployment in Japan. Explain. (iii) Japan’s long-run aggregate supply (c) Assume instead…Assume that both the U S and Canadian demand curves Assume that both the U. S. and Canadian demand curves for lumber are linear. The Canadian demand curve lies inside the U. S. curve (the Canadian demand curve hits the axes at a lower price and a lower quantity than the U. S. curve). Draw the individual country demand curves and the aggregate demand curve for the two countries. Explain the relationship between the country and aggregate demand curves in words. Assume that both the U S and Canadian demand curvesConsider Alpha, a country that is open to trade in goods and services with the rest of the world, where prices are fixed and in which only the goods market exists. In Alpha, the Marshall-Lerner condition doesn't hold — more precisely, net exports depend positively on the realexchange rate. Initially, the country is in goods market equilibrium, and trade is balanced. Having discussed which of the following three Figures provides a correct representation of the initial equilibrium in Alpha, describe the effects of a real appreciation. In particular, discuss if and how the various curves represented in the graph you have chosen will be affected, and explain the effects of the appreciation of the exchange rate on the equilibrium values of income, consumption, investment and net exports.
- Which of the following is correct? a. A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left. b. An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left. c. An increase in stock prices reduces consumption spending so that aggregate demand shifts left. d. An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.Assume Morocco is currently operating with an unemployment rate six percent above its natural rate of unemployment. Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves. Label the equilibrium price level PL1 and the equilibrium real output Y1. Label the full-employment level of output YF. Where on a production possibilities curve representing full employment in Morocco would current output be—on, outside, or inside the PPC? What can be assumed about inflation based on the information above? Assume that the output gap is estimated to be $156 billion and the government decides to take action. If the marginal propensity to consume is 0.75, by how much would it need to change government spending to close the gap? Show your work. If instead, government chose to use the income tax to close the output gap rather than changes in spending, calculate the change in tax revenue the government would need to close the gap.…Do you think the Heckscher-Ohlin model sufficiently explains trade between countries? Explain why you think yes, or no