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

Unemployment rate for each country, The following Table B presents the 2010...

The following Table B presents the 2010 population, employment, and unemployment data among working age persons for several countries. a. Calculate the number of people in the lab

Project topics, i want a project topics in macroeconomics

i want a project topics in macroeconomics

What are the important aspects in tracking the macro-economy, What are the ...

What are the important aspects in tracking the macro-economy? Important aspects in tracking the macro-economy: a. How economists utilizes aggregate measures to track the pre

National income, :- Consider a closed capitalist economy in which all produ...

:- Consider a closed capitalist economy in which all productions is undertaken by100 firms and wages and profits are theonly 2 categories of incomes. Assume further that all wages

Determine the main target of monetary policy, Determine the main target of ...

Determine the main target of monetary policy Since 1997 'official' main target of monetary policy has been to 'hit' inflation rate target set by government. Though since the o

Characteristics of endogenous growth theory, Q. Characteristics of endogeno...

Q. Characteristics of endogenous growth theory? There are many different explanations for technological progress. Most of them, though, have many common characteristics:

The three-year period of inflation annually, The GDP deflator in Economy la...

The GDP deflator in Economy land is 200 on January 1, 2010. The deflator rises to 242 by January 1, 2012, and to 266.2 by January 1, 2013. a. What is the annual rate of inflati

Calculate the npv for discount rates, Shambles, a large toy retailer, are l...

Shambles, a large toy retailer, are looking at bringing out a new range of soft toys. The range under consideration is "Mythical Beasts."  The "Mythical Beasts" range will cost £50

Is-lm model, what is Y = C(Y,T) + G + I(r)

what is Y = C(Y,T) + G + I(r)

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