EBK MACROECONOMICS
EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Chapter 13, Problem 3NP
To determine

To Evaluate: Effects on different economic variable under different condition using IS-LM model.

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You have the following annual figures for the New Zealand economy.             Investment expenditure                      $40.6 billion            Net Exports                                       $3.6 billion            Net Foreign Income                            -$9.5 billion The current account balance is equal to $____billon (use 1 d.p. and a negative sign if the balance you have calculated is a deficit). New Zealand domestic savings is equal to $____billon (use 1 d.p.). Suppose that the government introduces a policy that bans foreign investment in New Zealand.  If that happens then (everything else held constant) we would expect to see the current account balance -rise -remain the same. -fall -become harder to predict Suppose that along with the above policy, the government also wishes to see investment levels maintained.  If that is to occur, what else must be happening in the economy? - The Government must raise taxes. - Firms must be offered incentives to invest. - New…
In the foreign exchange market, the supply curve for the dollar is upward sloping. That is, when the exchange rate (foreign currency per dollar) increases, the quantity of dollars supplied increases. Assuming actors have not yet had time to change their expectations about the future exchange rate, when the exchange rate increases, why is the supply curve of dollars in the foreign exchange market upward sloping? Foreign goods and services are less expensive to import. U.S. firms profit more by selling their goods and services domestically rather than selling to foreigners. The expected profitability of purchasing a dollar today to sell in the future rises. U.S. goods are less expensive for foreigners to purchase.
Consider and economy described by the following equations: Y=C+I+G+NX Y = 10000 G= 2000 T= 1500 C = 300 +.7 (Y-T) I= 500 – 25r NX = 1000 - 1000€ r=r* = 6 a) In this economy, solve for national savings, investment, the trade balance, and the equilibrium exchange rate. b) Suppose now that G falls to 1,500. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate. c) Now suppose the world interest rate falls from 6 percent to 5 percent. G is again 2000. Solve for national savings, investment, the trade balance, and the equilibrium exchange rate.
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