Explain how the aa schedule is derived, International Economics

Assignment Help:

Q. Explain how the AA schedule is derived.

Answer: For a fixed real money supply an enhancement in output leads to an increase in the domestic interest rate. In the foreign exchange market an enhancement in the domestic interest rate leads to a lower nominal exchange rate therefore appreciating the currency. Therefore the relationship among nominal exchange rate and output is negative this leads to a negative slope of the AA schedule which has the ostensible exchange rate and output on its axes.


Related Discussions:- Explain how the aa schedule is derived

Heckscher-ohlin theory, Q. Countries do not in fact export the goods the H...

Q. Countries do not in fact export the goods the H.O. theory predicts. Discuss. Answer: This statement isn't true that though one may find several cases where it seems to be

What is a convertible currency, Q. What explains the nearly universal scope...

Q. What explains the nearly universal scope of the Great Depression? Answer: The international gold typical played a central role in starting deepening and spreading the Great

Terms of trade, Difference between net barter terms of trade and gross bart...

Difference between net barter terms of trade and gross barter terms of trade

Delay line, what is delay line in cro?

what is delay line in cro?

Economic growth, Q. It is impossible for economic growth in a small countr...

Q. It is impossible for economic growth in a small country to lower that country's economic welfare, regardless of the bias of the growth. Explain. Answer: This is a true st

U.s. government offers subsidy, Q. Suppose the U.S. government (but not Eu...

Q. Suppose the U.S. government (but not Europe) offers a $10 million subsidy? Answer: In this case Airbus would make a decision not to enter the market since it knows Boeing

Effects of increase in real national income on interest rate, What will be ...

What will be the effects of an increase in real national income on the interest rate? Answer: An enhance in real national income will increase the interest rate.  If investment

British economy, how is it the economy during the two wars and till 20 th

how is it the economy during the two wars and till 20 th

Is europe an optimum currency area, Q. Is Europe an optimum currency ...

Q. Is Europe an optimum currency area? Answer: Yes the area's economy is strongly integrated with its own: most EU members export as of 10 to 20 percent of their output

PPP, Why would interest rate parity hold better than Purchasing power parit...

Why would interest rate parity hold better than Purchasing power parity overtime?

Write Your Message!

Captcha
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