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Assume that absolute purchasing power parity holds in the long-run, that the moneymarket clears in each country, and that in both countries the demand for realbalances or "liquidity preference" takes the form L = a Y - b i where Y is the log of real income, and i is the nominal interest rate. Derive an expression for the log price level, in the home (US) and foreign country, and for the nominal exchange rate in terms of money supplies, outputs, and interest differentials. Analyze and describe in words the impact for the exchange rate in the long-run of each of the following:
a) A tightening of US monetary policy
b) A decline in the foreign country's natural output level
c) An increase in the domestic natural output level and explain your answers carefully.
Explain how banks are financial intermediaries. What are reserves? What are excess reserves? Explain how the Fed can affect the quantity of excess reserves in the banking system
The Federal Reserve’s strategy will require changing the money supply. How does the Federal Reserve do this, and how (and why) does this affect interest rates?
For each of the determinants of demands, identify an example illustrating the effect on the demand for hybrid gasoline-electric vehicles such as the Toyota Prius. Then do the same for each of the determinant of supply. In each instance.
Clipit utilize this advantage to be the first to choose its profit-maximizing output level in the market.
While in class we focused on fixed vs. flexible exchange rates, many nations have intermediate cases. For example, some nations have band, where rates are fixed plus or minus some percent. For example, a nation may fix its rates at 10 pesos ..
Keynes is famous for saying: "In the long run we are all dead". How long is the long run? How long are you willing to wait for inflation to ease or for unemployment to improve?
Suppose that Wal-World and Tarbo are independently deciding whether to implement a new bar code technology. It is less costly for their suppliers to use one system and the following payoff matrix shows the profits per year for each company.
Discuss why the Reserve Bank of Australia (RBA) has moved the cash rate from 7% to an all-time low of 2.5 % in August 2013, and since than it has maintained this rate.
Explain how have monetary and fiscal policies affected the prices of the product the petroleum industry produces.
Conduct research on the economic performance of United State of America over the last ten years from 2004 to 2013, applying the macroeconomic indicators of real GDP, real GDP growth rate, real GDP per capita, unemployment rate and inflation rate to a..
Suppose the two rival office supply companies Office Depot and Staples both adopt price matching policies. If consumers can find lower advertised prices on any items they sell, then Office Depot and Staples guarantee.
Due to the slow down economy, it is expected that there will be .7 million additional workers who will lose their jobs next month. Determine the expected unemployment rate for next month?
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