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Fixed Exchange Rates and Recession
A South America country with fixed exchange rate system has close economic ties with the USA symbolized by extensive trade and unrestricted flow of capital between the two countries. The economy of this country is in recession and the president of the country tries to get the central bank to intervene and help the economy out of the recession using monetary policy. In a meeting with governor of the central bank, the country's president cites Federal Reserve Board's expansionary monetary policy in the USA during the 2001-2003 period to persuade the governor, but the governor takes the position that the central bank should not intervene.
Do you agree or disagree with the position taken by the governor? Justify and explain your answer using IS-LM curves. Describe precisely each step in the process that you present to explain your answer and label the steps as a, b, c, d, etc, to clearly show the sequence of events and understanding of it for practice problem.
Illustrate what were some of the major contributing factors and how did they combine to cause the recession. How were you affected by it.
Elucidate the difference between the government purchases multiplier and the net tax multiplier. If the MPC falls, what happens to the tax multiplier.
The following quotations are from an article in the Financial Times on November 9, 2007:
By how much will each firm reduce its SO2 output? Which firm will buy permits, which firm will sell them, and how many permits will be exchanged?
Compute the implied arc price elasticity of demand. Is a further price decrease warranted.
Elucidate how an attempt by the government to lower inflation could cause unemployment.
Illustrate what would be various variations and perspectives from current economic downturns
Draw a correctly labeled loanable funds graph that shows what happens to real interest rates.
In article on the steel industry, The Wall Street Journal noted that as steel prices were falling, steelmakers were not cutting production
Describe the idea of trade offs cost also benefit analysis when answering the above question.
What happens to labour supply increases?-He will work more as wages increase, but only if n > 0.
Budweiser, Miller and Coors who together produce 80% of all beer consumed in the US, each spend well over $250 million a year on television advertising campaigns, promoting their beer brands.
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