Explain what must occur for the interest parity

Assignment Help Macroeconomics
Reference no: EM13816867

Answer the question below with relevant graphs, equations, estimations, and explaining clearly in words. Also, you may not copy from the textbook materials or from any other sources in the Internet.

Your answers must be in your own words based on your knowledge in the relevant topics in the course learning.

a. Suppose the domestic and foreign interest rates are both initially equal to 4%. Now suppose the foreign interest rate rises to 6%. Explain what effect this will have on the exchange rate. Also explain what must occur for the interest parity condition to be restored.

b. Assume the exchange rate is allowed to fluctuate freely. Using the IS-LM-IP model, graphically illustrate and explain what effect an increase in government spending will have on the domestic economy. In your graphs, clearly label all curves and equilibria.

c. Assume the exchange rate is allowed to fluctuate freely. Using the IS-LM-IP model, graphically illustrate and explain what effect expansionary monetary policy will have on the domestic economy. In your graphs, clearly label all curves and equilibria.

d. Assume that policy makers are pursuing a fixed exchange rate regime. Now suppose that the foreign interest rate falls. Discuss what policy makers must do to maintain the pegged exchange rate. Also discuss what effect this will have on domestic output and net exports.

e. Assume the exchange rate is fixed. Using the IS-LM model, graphically illustrate and explain what effect an increase in consumer confidence will have on the domestic economy. In your graphs, clearly label all curves and equilibria.

Reference no: EM13816867

Questions Cloud

Discuss main differences between leadership and management : What does Kotter argue are the main differences between leadership and management. Do you believe he is right. Why or Why not.
Propose an epidemiological project : Propose an Epidemiological Project
Explain the organizational culture analysis : Symbols of culture are called artifacts. Artifacts are the most visible and accessible level of culture. These include behaviors, stories, rituals (everyday practices that are repeated frequently), and symbols (e.g., company logos, company colors)..
Contrast the essential differences between slt and slii : Compare and contrast the essential differences between SLT and SLII. Are the differences significant. Why or why not
Explain what must occur for the interest parity : Suppose the domestic and foreign interest rates are both initially equal to 4%. Now suppose the foreign interest rate rises to 6%. Explain what effect this will have on the exchange rate. Also explain what must occur for the interest parity condit..
Describe the two roles of leaders : Describe the two roles of leaders. Then identify a leader involved in a current event, a current leader of a company or organization (it could be your church, your workplace, or the workplace of someone you know very well), or a leader in your cir..
How does your analysis reflect your own study of humanities : How does your analysis reflect your own study of the humanities? What did you learn about yourself, other cultures, and other time periods through the study of these artistic artifacts?
Recruitment and staffing proposal : The objective of this assignment is to allow you to demonstrate your knowledge of the steps required to recruit and staff for an important segment of the workplace and to demonstrate your strategic skills to the CEO.
Different factors which can affect the promotion mix : What are some of the different factors which can affect the promotion mix? Think about and provide examples of two different message strategies you've seen in commercials in the last year. Why do you think they were or were not effective

Reviews

Write a Review

Macroeconomics Questions & Answers

  How the slope of a country production possibilities frontier

Economic analysis that takes into consideration linkages between markets is called ? A. partial equilibrium anaylysis B. input output analysis C. general equilibrium analysis D. cost-effectiveness analysis E. none of the above

  Identify trade problems of the developing nation

Examine the characteristics of the developing nation's trade and identify trade problems of the developing nation.

  Ticket for upper-deck tickets overlooking the end zone

Is it price discrimination when a professional football team charges say, $150 per ticket for 50-yard-line tickets in the lower deck and $50 per ticket for upper-deck tickets overlooking the end zone?

  What would happen to its profits if prices remained fixed

If a firm had everywhere increasing returns to scale, what would happen to its profits if prices remained fixed and if it doubled its scale of operation?

  Subsiquent issues are macroeconomic or microeconomic

Identify whether the subsiquent issues are macroeconomic or microeconomic and explain why you categorized them in that way.

  Elucidate are the characteristics of the market for lemons

Elucidate are the characteristics of the market for lemons.

  How much will the aggregate demand at current prices

Suppose the consumtion function is ( C = $500 billion + 0.9Y) and the government wants to stimulate the economy. By how much will the aggregate demand at current prices shift intially (before multiplier effects) with (a) A 50 billion dollar increa..

  Explain how each relates to health care

Explain how each relates to health care. I have the definitions but i am unsure how they relate to health care.

  Effect of shocks on long run

Suppose that deterioration in the education level of the U.S. population reduces the marginal product of labor.

  For each level of output calculate the variable cost vc for

for each level of output calculate the variable cost vc. for each level of output except zero output calculate the

  Discuss perfect competition and long-run equilibrium

Discuss perfect competition and long-run equilibrium. Provide detailed descriptions, definitions and concrete examples of your findings. Additionally, how does the proliferation of global trade and competition contribute to markets moving

  Determine gdp by both the expenditures and income approaches

To the right is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and the income approa..

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!

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