Questions from Macroeconomics

Q: In this chapter, we showed that a reduction in the interest

In this chapter, we showed that a reduction in the interest rate in an economy operating under flexible exchange rates leads to an increase in output and a depreciation of the domestic currency. a. Ho...

Q: Consider an open economy with flexible exchange rates. Let UIP stand

Consider an open economy with flexible exchange rates. Let UIP stand for the uncovered interest parity condition. a. In an IS-LM–UIP diagram, such as Figure 19-2, show the effect of...

Q: Suppose there is an expansionary fiscal policy in the foreign country that

Suppose there is an expansionary fiscal policy in the foreign country that increases Y* and i* at the same time. a. In an IS-LM–UIP diagram, such as Figure 19-2, show the effect of t...

Q: Consider a fixed exchange rate system, in which a group of

Consider a fixed exchange rate system, in which a group of countries (called follower countries) peg their currencies to the currency of one country (called the leader country). Because the currency o...

Q: The effectiveness of monetary policy in an open economy is enhanced when

The effectiveness of monetary policy in an open economy is enhanced when the central bank has the flexibility to change the exchange rate and the willingness to change interest rates. Suppose that the...

Q: This question explores how an increase in global demand for domestic assets

This question explores how an increase in global demand for domestic assets may slow down the depreciation of the domestic currency. Here, we modify the IS-LM-UIP framework to analyze the effects of a...

Q: Suppose that an economy is characterized by the following behavioral equations (

Suppose that an economy is characterized by the following behavioral equations (in billions of euros): a. Equilibrium GDP (Y) b. Disposable income (YD) c. Consumption spending (C).

Q: Using the information in this chapter, label each of the following

Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly. a. If the nominal exchange rate is fixed, the real exchange rate is fixed. b....

Q: An exchange rate crisis occurs when the peg (the fixed exchange

An exchange rate crisis occurs when the peg (the fixed exchange rate) loses its credibility. Bond holders no longer believe that next period’s exchange rate will be this periodâ...

Q: Equation (20.5) provides insight into the movements of

Equation (20.5) provides insight into the movements of nominal exchange rates between a domestic and a foreign country. Remember that the time periods in the equation can refer to any time unit. The e...