Using the model that we have developed, show what would happen with a new equilibrium domestic price level and real output if the Central Bank increases the policy rate. What will be the size of the AD curve shift? Keeping nominal exchange rate and foreign price level constant, what will happen with the real exchange rate, import and net export?
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Using the model that we have developed, show what would happen with a new
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- Using the model that we have developed, show what would happen with a new equilibrium domestic price level and real output if the government increases government spending that are fully financed by increase of taxes (change of government spending is equal to the increase of taxes). What will be the size of the AD curve shift? Keeping nominal exchange rate and foreign price level constant, what will happen with the real exchange rate, import and net export?Suppose the government releases information that causes people to expect the purchasing power of the local currency in the future will be less than they previously had expected. What will happen to the FX rate today? Select one: a.The currency will weaken. b.There will be no immediate change. c.The currency will strengthen. d.It is hard to forecast. Which of the following statements is/are true with regard to the movements in cross exchange rates? Choose all that apply. Select one or more: a.A change in the equilibrium cross exchange rate over time is due to the same types of forces that affect the demand and supply conditions between two currencies. b .If currencies A and B move in the same direction by the same degree against the dollar, currency A will also move in the same direction by the same degree against currency B. c.When currency A appreciates against the dollar by a greater degree than currency B, then currency A depreciates against currency B. d.If currency A appreciates…For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock and the policy response. Note: Assume the government responds by using monetary policy to stabilize output and assume the exchange rate is floating. For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C, I, and TB. a. Foreign output decreases. b. Investors expect a depreciation of the home currency. c. The money supply increases. d. Government spending increases. Please illustruate the IS-LM model and explain in detail. I want to understand for the upcomming test
- The electricity prices and the natural gas prices have increased drastically, 15 percent and 12 percent respectively. The direct effect of these increases on the inflation rate is 0.6 percent, and the indirect effect is more than 1 percent. Taking into consideration that the producer price index is over 38 percent. Please discuss in detail the effects of these increases on the consumer price index, exchange rate and the current account deficit. What are the policies that should be implemented to counterbalance the effects of these price increases on the economy?Please assist with D & E: What is the impact of each of the following changes (other variables remaining unchanged) on the real exchange rate. (a) The Consumer Price Index (which measures the price level) in the United States rises by 4 percent. (b) The Consumer Price Index in Jamaica rises by 9 percent. (c) The two Consumer Price Index changes above occur at the same time. (d) The nominal exchange rate moves from 86 to 90 for a U.S. dollar. (e) The nominal exchange rate depreciates by 10 percent at the same time that local inflation is 10 percent and the U.S. price level is stable. Please assist with D & E:exports and the IS curve: Consider the way in which net exports dependon the real exchange rate. Does the dependence of net exports on the realexchange rate make the IS curve steeper or fatter?
- For each of the following statements, show graphically and explain the expected effets of the equilibrium price and output for aggregate demand and aggregate supply, other things remaining constant. a) A lower exchange rate;Derive the AD curve (representing medium run combinations of real exchange rate and output, where goods market is in equilibrium and r = r*) from the IS curve. Hint: think about how changes in the real exchange rate affect the IS curve. To derive the AD, map the combinations of q and y on each IS curve at r = r*. Please provide an illustration of the mapping and the deriving of the AD.In your macroeconomic lectures you are often told that exchange rates and interest rates are important for macroeconomic decision-making. How does an increase in Japan’s government budget deficit affect each of the following? The real interest rate in the short run in Japan. Explain. Private domestic investment in plant and equipment in Japan. Draw a correctly labeled graph of the foreign exchange market for the euro, and show the effect of the change in the real interest rate in Japan from part (a)(i) on each of the following. Supply of euros. Explain. Yen price of the euro To reverse the change in the yen price of the euro identified in part (b) (ii), should the European Central Bank buy or sell euros in the foreign exchang market? Explain.
- For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock. For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C, I, and TB. Assume the government allows the exchange rate to float and makes no policy response. d. Government spending increases For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock and the policy response. Note: Assume the government responds by using monetary policy to stabilize output and assume the exchange rate is floating. For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C, I, and TB. d. Government spending increases. Please illustruate the IS-LM model and explain in detail. I want to understand for the upcomming test. Thank you in advanced.How can a surge in exports and decrease in imports cause an increase in aggregate demand and what effects does it have on the exchange rate and interest rate?You are the chief economic adviser in a small open economy with a floating exchange rate system. Your boss, the president of the country, wishes to increase the level of output in the short run in order to win reelection. Do you recommend using monetary or fiscal policy? Expansionary or contractionary? Use the Mundell-Fleming model to illustrate graphically your proposed policy. State in words what happens to real output, the nominal exchange rate, the level of consumption, the level of investment, and the net exports,