Equilibrium interest rate and domestic current account
Course:- Business Economics
Reference No.:- EM13891913

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Business Economics

1. Now assume that the economy is open and that the world interest rate is determined on the world market instead of in the domestic economy. Use a two-country model with initial current accounts equal to zero. Use world saving - investment diagrams to answer the questions below.

a. How does an increase in domestic wealth affect the world equilibrium interest rate and the domestic current account?

b. How does an equal increase in current domestic taxes and government spending affect the world equilibrium interest rate and the domestic current account?

c. How does an increase in domestic total factor productivity affect the world equilibrium interest rate and the domestic current account?

2. Now turn to consider a small open economy. How does each of the shocks above affect the domestic current account? Your answer will have three savings investment graphs, one for each shock above.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
Suppose the market for good X has a four-firm concentration ratio of 0.50. Furthermore, assume that total sales in the industry are $1.2 million. Based on this information, we
Recently, a bank was trying to decide what fee to charge for "expedited payments"—payments that the bank would transmit at a faster speed to enable customers to avoid late fee
Major factors in the system of American government are the political parties and their roles and functions within the system. In a minimum of three well-written paragraphs, di
Why is it sometimes difficult to apply the same rules of morality to political leaders that we apply to all individuals? Pulling in examples from the readings and Lessons, exp
In your opinion, does the Houston Medical Center, in which many hospitals gather, represent an example of perfect competition, monopolistic competition, collusive oligopoly.
Suppose that two consumers care only about the goods that they own. (The goods are private for them.) Starting from a competitive equilibrium allocation, is it possible for bo
Taxes create deadweight losses. Therefore Pigouvian taxes create deadweight losses. Is the latter statement true, false, or uncertain. Clearly indicate whether the statement i
A manufacturing company produces steel housings for electrical equipment. The main component part of the housing is a steel trough that is made out of a 14-gauge steel coil. C