Study the effect of an increase in income, International Economics

Assignment Help:

Q. Using a figure illustrate the simultaneous equilibrium of the foreign exchange and domestic money markets when the exchange rate is fixed at E0 and is expected to remain fixed at E0 in the future.  Assume both P and Y is constants.  Now, study the effect of an increase in income, Y.

Answer:  The L(R*, Y) will shift down as well as to the right, which will require an increase in M to M2. This will necessitate the domestic central bank to purchase foreign assets and thereby increase the money supply leaving E at E0. Note that R = R* at the new balance as before.

1229_study the effect of an increase in income.png


Related Discussions:- Study the effect of an increase in income

Explain why the polish economy has done better, Q. Contrast the crisis in P...

Q. Contrast the crisis in Poland and Russia. Explain why the Polish economy has done better? Answer: With the end of the 1990s a handful of East European economies including

Global crisis, Chose a problematic situation that is related to your workpl...

Chose a problematic situation that is related to your workplace and use the following approach to investigate it. Part A:    i-  Give a brief description of the situation.

Opportunity cost, Write notes on opportunity cost by Haber lal

Write notes on opportunity cost by Haber lal

What are floating rate notes, What are floating rate notes? Explain the var...

What are floating rate notes? Explain the various types of FRNS FRNs are bonds that do not carry a fixed rate of interest. The various forms of FRNs are : Perpectual FRN Minmax

Calculus, Application of defferential calculus in economics

Application of defferential calculus in economics

Postwar worlds key currency, Q. Explain why the dollar of the United ...

Q. Explain why the dollar of the United States became the postwar world's key currency. Answer: 1. The untimely convertibility of the U.S dollar in 1945. 2.

Domestic investment rates, Q. Explain why, according to Feldstein and Horio...

Q. Explain why, according to Feldstein and Horioka, one should expect that domestic investment rates diverge widely from saving rates. Answer: The decisions of corporations t

Causes of the u.s. savings and loans crisis, Q. Explain the causes of...

Q. Explain the causes of the U.S. Savings and Loans crisis of the early 1980s. Answer: On the one hand permitting S&L to make a lot riskier loans for instance loans on co

Modern theory of trade, #question.explain me Hecksher OHLIN theory of inter...

#question.explain me Hecksher OHLIN theory of international trade in simple english

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