User Account

All Pages

Consider a group of open economies

Assignment Help Business Economics
Reference no: EM131523961

1. Consider a group of open economies; assume perfect capital mobility.

a. Assume there is a Leader country. All other countries (referred to as Follower countries) fix their exchange rates vis-à-vis the Leader country. Discuss the effectiveness of monetary policy in the Follower countries.

b. If all countries fix their exchange rate vis-à-vis the Leader country, isn't the Leader country's exchange rate also fixed? What does this imply for the effectiveness of the Leader country's monetary policy?

c. If the Leader country raises its interest rate to fight inflation, what must the Follower countries do to maintain their fixed exchange rates? What is the effect on their economy? What would happen in Follower countries if they did not change their interest rates?

2. Consider the Mundell-Fleming (open economy IS-LM) model. Assume that there is a flexible exchange rate regime. In all cases consider the effects in two cases: when the central bank keeps the interest rate unchanged and when it changes it to avoid possible inflationary/deflationary pressures.

a. Show the effect of a decrease in foreign output, Y*, on domestic output, and net exports. Y.

b. Show the effect of an increase in the foreign interest rate, i*, on domestic output and net exports when the domestic central bank keeps the interest rate fixed. Explain in words.

c. "A monetary policy contraction abroad may well lead to a recession at home." Discuss.

d. "A fiscal policy contraction abroad will lead to a recession at home" Discuss. Consider the cases when the foreign central bank keeps the interest rate unchanged or decreases it.

Reference no: EM131523961

Questions Cloud

Explain starbucks shareholder value analysis : What is Starbucks operating leverage? What is Starbucks strategic valuation? Explain Starbucks shareholder value analysis?
Levels of technology and productivity : In doing this you need to look at how the determinants of aggregate supply - such as levels of technology and productivity - can be raised.
Explain what the most important parts of business plan : Explain what the most important parts of a business plan are.
Create graphs of subjective cdfs : Forecasters often provide only point forecasts, which are their best guesses as to an upcoming event.
Consider a group of open economies : 1. Consider a group of open economies; assume perfect capital mobility.
The position of ethics in a world of progressive technology : Bioethics is the the study of the position of ethics in a world of progressive technology and medicine.
Total-revenue-total-cost approach : Explain how purely competitive firms can use the total-revenue-total-cost approach to maximize profits or minimize losses in the short run.
Compute the expected annual rate of return for the strategy : Your strategy is to sell the stock at that time. Compute the expected annual rate of return for the strategy.
What assumption must you make to find the variance : A company owns two different computers, which are in separate buildings and operated entirely separately. Based on past history, Computer 1 is expected.

Reviews

Write a Review

 

Business Economics Questions & Answers

  Employ more people at higher wages

The City Council in Bigtown is debating whether to give monopoly rights to Bigtown Cable TV, Inc. Bigtown Cable is arguing that monopoly rights will allow it to employ more people at higher wages. As the staff economist for the City Council, analyze ..

  Outline the differences between adam smith

1. If a 20 increase in the price of a commodity caused a 30% decline in its purchase, acalculate the corresponding demand elasticity for the commodity Is demand elastic? 2. Outline the differences between Adam Smith and Mercantilists with respect t..

  Relationship between perfectly competitive firms MRP curve

What is the relationship between a perfectly competitive firm's MRP curve for an input and that firm's demand curve for that input?

  Find variable cost-fixed cost and average cost

Find Variable cost, fixed cost, average cost, average variable cost and average fixed costs. At what range of prices will the firm produce negative profit (Short run loss minimize)?

  Develop a universal set of ethical standards for business

Do you feel that it is possible to develop a universal set of ethical standards for business, or do you believe that cultural differences make universal standards impractical and/or impossible?

  Assume that all the factors affecting demand

Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the price changes are 100, 200, 300, 400, 500, 600 dollars. a) Plot the demand curve for the firm.

  Consists of complex bricks and basic bricks

Lego boxes: A box of Legos consists of complex bricks and basic bricks. The production function of Lego boxes is assumed to be: Assuming that the Lego company optimizes its production, explain why the relative price of a complex brick relative to a b..

  Why does the supply curve slope upward

Explain the law of supply. Why does the supply curve slope upward? How is the market supply curve derived from the supply curves of individual producers?

  Reduces the need for government involvement in marketplace

Which of the following factors reduces the need for government involvement in the marketplace?

  Explain why does this happen fluctuating prices of gasoline

We are all familiar with fluctuating prices of gasoline at the pump. Explain why does this happen.

  The n.m corporation has exactly the same costs of production

The N.M. Corporation has exactly the same costs of production as last year except for fixed cost, which are $50,000 this year compared to $30,000 last year. Which of the following statements is false?

  Some airline executives have called for re-reregulation

Some airline executives have called for "re-reregulation." Why might an executive of an airline prefer to operate in a regulated environment?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd