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Q. Using a figure, show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run.
Answer: A temporarily monetary expansion will move the economy from DD1 to DD2 and output increases. A permanent financial expansion will as well shift the AA curve to the left and down. The small exchange rate appreciates that is E decreases.
Q. Based on the case study, answer the following question: Can currency boards make low-inflation policies credible? Answer: Currency boards have the power to bring in anti-
In a day of production, firms in angola can produce 200 liters of oil or 10 kilograms of tungsten. Firms in Namibia can produce 160 liters of oil or 60 kilograms of tungsten. Which
Q. Explain why the EMS countries decided to fix their exchange rates against the German DM? Answer: In this manner the other EMS countries in effect imported the credi
How is the foreign exchange rate determined?
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Q. Suppose E is fixed at E 0 and that the asset markets are in equilibrium. Suddenly output rises. What monetary measures keep the current exchange rate constant given unchanged e
What are the predictions for the long run of the Monetary Approach? Answer: Money supplies- Known the equations
What exactly is IMF and why is it so important in helping Europe? How exactly does it help Europe and what effects does its help have on rest of the world?
Q . Consider that the relative capital abundance of Australia was so much greater than that of Sri-Lanka, that we would have to locate Australia far to the right on the K/L axis.
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