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

Describe a hypothetical ideal, Design a hypothetical ideal randomized contr...

Design a hypothetical ideal randomized controlled experiment to study the effects on highway traffic deaths of wearing seat belts. Suggest some impediments to implementing this exp

Gkx industries expects sales of its hydraulic seals, GKX Industries expects...

GKX Industries expects sales of its hydraulic seals (in inch and metric sizes) to increase according to the cash flow sequence $70+4k, where k is in years and cash flow is in $1000

Average cholesterol level, In a sample of 80 people who have had strokes, t...

In a sample of 80 people who have had strokes, the average cholesterol level was 250 with a standard deviation of 70. In order to test the hypothesis (at the 5% level of significan

Determine about the interest rates, Determine about the interest rates ...

Determine about the interest rates The interest rate may be fixed or floating. If it is fixed, you will pay the same percentage for the entire duration of the loan. With a floa

Set up a diagram.., (a) Use this information to set up a diagram showing th...

(a) Use this information to set up a diagram showing the firm''s total revenue and total cost schedules. In this diagram, show the points at which the firm is maximizing profits.

Explain about penicillic acid, Q. Explain about Penicillic Acid? This m...

Q. Explain about Penicillic Acid? This mycotoxin has biological properties similar to patulin. It is produced by a large number of fungi, including many Penicillia as well as m

Draw game in two standard forms, Consider the following game [payoffs are i...

Consider the following game [payoffs are in the form: (Ann, Bob, Carol)]: a) List each player's actions and strategies. b) If Ann "buys" Carol's position in the game (i.

Determinants of long run prosperity rank, he questions posed are broad and ...

he questions posed are broad and open ended so be careful to allow yourself enough research and planning time. If you are completely on top of the material delivered in class, then

What are forms of price ceiling to lead inefficiency, What are forms of pri...

What are forms of price ceiling to lead inefficiency? Price ceilings frequently lead to inefficiency into the forms of: a. Ineffective allocation to consumers b. Wasted r

Total cost of linear equation, The total cost C of producing x units of som...

The total cost C of producing x units of some commodity is a linear function. Records show that on one occasion, 100 units were made at a total cost of $200, and on another occasio

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