OPEN-MARKET MACROECONOMICS, Macroeconomics

Assignment Help:


Macroeconomics: Question 1 and 2 relate to content and skills covered --- OPEN-MARKET MACROECONOMICS: BASIC CONCEPTS , International Trade and Exchange Rates

Question 3 relates to content and skills covered in A MACROECONOMIC THEORY OF THE OPEN ECONOMY, The Open Economy

Question 1

Word limit: Approximately 100-200 words Marks: 5 marks

Clearly explain how net foreign investment links the market for loanable funds and the market for foreign currency exchange. Make sure you define net foreign investment in your answer.

Question 2 Word limit: Brief answers for each question – approximately 100-200 words in total Marks: 5 marks



a) Clearly differentiate between real and nominal exchange rates. (2 marks)

b) In terms of the real exchange rate, what three variables could change to make a country less competitive internationally? (1 mark)

c) Assume that a Mazda 2 sells for 16,000 Australian dollars in Australia and 10,000 Canadian dollars in Canada If purchasing-power parity holds, what is the Canadian dollar/Australian dollar exchange rate? How many Australian dollars will a Canadian dollar buy? Make sure you show your calculations. (2 marks)

Question 3 Word limit: Approximately 500 words Marks: 20 marks Use a diagram of the open economy model (e.g. fig 32.4 from the text) to illustrate and explain the effect of the following event on the market for loanable funds, the level of net foreign investment and the market for foreign-currency exchange.

In your answer make sure you discuss the impact on the following variables:

• Interest rates, public savings, private savings, national savings, investment, net foreign investment, supply of currency, the exchange rate and the level of net exports.

Event: There is an increase in consumer confidence in the economy

Note: Ignore the detail and politics of this event. Focus only on analysing the market adjustment in each case. ------------------------------------

Marking Criteria for Question 3

Use the equation for national savings = investment to determine which curve is affected and why. 1 mark

Correct diagram – fully labelled showing initial equilibrium in each market and correct adjustments to new equilibrium 4 marks

Explanation of events that occur within the market for loanable funds:

• Direction of shift of correct curve

• Problem within the market for loanable funds that now exists at the initial interest rate

• Adjustment process to new equilibrium 5 marks

Explanation of events that occur in the net foreign investment diagram: Shift or movement of NFI curve? Why? 2 marks

Explanation of events that occur in the market for foreign currency exchange: Which curve shifts/why/which direction? Problem within the market for foreign currency exchange that exists at the initial exchange rate Adjustment process to new equilibrium 5 marks

Overall impact on the level of interest rates, public savings, private savings, national savings, investment, net foreign investment, supply of currency, the exchange rate and the level of net exports. 3 marks


Related Discussions:- OPEN-MARKET MACROECONOMICS

Market for a particular type of computer memory chip, 1. Consider the marke...

1. Consider the market for a particular type of computer memory chip. Would you expect the long-run (own-price) elasticity of supply to be larger or smaller than the short-run elas

What do you mean by gross domestic product, Q. What do you mean by Gross do...

Q. What do you mean by Gross domestic product? Perhaps the most significant concept in macroeconomics is Gross Domestic Product (GDP): Gross Domestic Product (

Important for policymakers, Why is it important for policymakers to conside...

Why is it important for policymakers to consider both the direct and indirect effects of public policies?

Why economists use real gdp rather than nominal gdp, Explain why we cannot ...

Explain why we cannot measure the national product simply by adding up the production of all firms. Why do the economists use real GDP rather than nominal GDP to gauge economic

Determine the problems there with consumer price index, Determine the Probl...

Determine the Problems evolved with Consumer Price Index To illustrate problems involved in calculating CPI we consider MP3 players. If you measure average price of MP3 players

Nation in which the volume of goods, Consider a nation in which the volume ...

Consider a nation in which the volume of goods and services is growing by 5 percent per year. If a country's economic size is growing faster than the rest of the world, then

Explain gdp, You are given the following information about an economy: ...

You are given the following information about an economy: Gross Investment  =                                                         40 Govt. purchases of goods & service =

Explain the problem with IS-LM model, Q. Explain the problem with IS-LM mod...

Q. Explain the problem with IS-LM model? The starting point of AS-AD model is an assumption in IS-LM model (and in the cross model) that limits its usefulness. This is an assum

Accounting system-example ii, ACCOUNTING SYSTEM-EXAMPLE Let us now intr...

ACCOUNTING SYSTEM-EXAMPLE Let us now introduce a complication. There are three firms in the production sector. The Fruit Extracts Company manufactures from raw fruit, fruit ext

Inflation, Social and Political Effects of Inflation in India and Other Cou...

Social and Political Effects of Inflation in India and Other Countries

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