Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Explain the effects of a permanent increase in the U.S. money supply in the short run and in the long run. Assume that the U.S. real national income is constant.
A raise in the nominal money supply increases the real money supply and lowering the interest rate in the short run. The money supply enhance is considered to maintain in the future therefore, it will influence the exchange rate expectations. This will make the predictable return on the euro more desirable and therefore the dollar depreciates. In the case of an enduring increase in the U.S. money supply then the dollar depreciates more than under a temporary increase in the money supply.
Currently in the long run prices will increase until the real money balances are the same as prior to the permanent increase in the money supply. Ever since the output level is given the U.S. interest rate which decreased prior to start to increase until it will move back to its original level.
The balance interest rate should be the same as its original long -run value. This raise in the interest rate should cause the dollar to appreciate against the euro after its sharp depreciation as a result of the permanent raise in the money supply. Thus a large depreciation is followed by an appreciation of the dollar. Ultimately the dollar depreciates in proportion to the increase in the price level which in turn enhance by the same proportion as the permanent increase in the money supply. Therefore money is neutral in the sense that it can't affect in the long run real variables for instance investment, output, and so on.
INTERNATIONAL FINANCE International finance is concerned with the mobility of financial capital across the countries, and the problems and opportunities this mobility p
Q. What are the predictions of the PPP theory with regard to the real exchange rates? Answer: The real exchange rate among two countries is a broad summary measure of
Role of foreign trade to the economic development?
can Lesotho afford an independent monetary policy
What is Tugend''s stance toward the practice of multitasking? Point out specific phrases that reveal her attitud. How appropriate is her stance, given her subject matter?
Q. Why is it that an industry is performing under conditions of domestic internal scale economies (applies to firm in the country) - then the resultant equilibrium can't be consis
Q. "The H.O. model remains useful as a way to predict the income distribution effects of trade." Discus s. Answer: The Stolper-Samuelson theorem, one of the basic theorems ari
Q. Why do you suppose that South-South trade does not conform in volume, but does conform in pattern with expectations prepared by the Heckscher-Ohlin model? Answer: The patt
Q. What is the policy of sterilization? Give an example. Answer: • Untainted foreign exchange intervention - policy by which central banks perform equal foreign
what is this all about
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd