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

Money banking and finance, The analysis of the speculative demand for money...

The analysis of the speculative demand for money reveals the importance of the level of wealth. Explain this assertion in detail

Description of var, In order to observe the correlations between each varia...

In order to observe the correlations between each variable, the most effective method to use is Vector Autoregression (VAR). VAR estimation uses a system of simultaneous equations

Household production, Assume two individuals, A and B, are considering marr...

Assume two individuals, A and B, are considering marriage, and each face the same amount of hours a week to be split between market-labor and home-labor.  Assume that A can make $2

Money supply nominol income , a small country produces 5000 units of output...

a small country produces 5000 units of output and has a money suplly of $2000. if citizens want to hold 10% of their income in money ie k=0.1 what are v, $gnp, p and real money sup

Which of the following statements is correct, Which of the following statem...

Which of the following statements is true? a. economic profit equals accounting profit minus implicit costs b. the short run is any period of time in which there is at least

Money supply.., term paper on determinat and multiplier of money supply

term paper on determinat and multiplier of money supply

Account that earns, Suppose you have decided to do some savings. You will d...

Suppose you have decided to do some savings. You will deposit $200 this year into an account that earns 2% per year and increase the amount deposited each year by 20% in every year

Steady state in solow model, conditions for steady state in solow model.in ...

conditions for steady state in solow model.in what respects is golden rule different from steady state?

#title. phillip curve, what does phillip curve signify? how do you reconcil...

what does phillip curve signify? how do you reconcile the difference in the shap of the curve in the short run and the long run?

Ppcs, how to get full marks in a drawing of ppc diagrams

how to get full marks in a drawing of ppc diagrams

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