Corporate downsizing and lack of job security

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If corporate downsizing and lack of job security cause consumers to spend less and save more, what will be the impact on the exchange rate and trade balance? Use the long-run model of a small open economy to illustrate graphically the impact of this decline in consumer confidence on the exchange rate and the trade balance. Assume the country starts from a position of trade balance, i.e., exports equal imports. Be sure to label: (i) the axes; (ii) the curves; (iii) the initial equilibrium values; (iv) the direction the curves shift; and (v) the new long-run equilibrium values.

Reference no: EM132640129

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