Question 1 a) Using graphs and explaining the mechanisms, determine the equilibrium in an open economy...

Question 1

a) Using graphs and explaining the mechanisms, determine the equilibrium in an open economy using the model of the market of loanable funds and foreign currency exchange. Discuss how the interest rate, r, and the exchange rate, e, are determined.

b) In the above, what happens when the government runs a budget deficit?

c) In question (a), what happens if the government decides to implement an import quota? Briefly explain why a government would implement such a trade policy.

d) Explain, using graphs, how the political instability in Mexico in 1994 lead to capital flights

Expert Solution

Rahul Sunny answered 7 months ago

Question 5 Draw the graphs for a Malthusian economy in equilibrium. A meteor from outer space...

Question 5 Draw the graphs for a Malthusian economy in equilibrium. A meteor from outer space hits earth and kills some of the population. Determine the short run impact on the equilibrium (label these with an a) Determine the long run impact on the equilibrium (label these with a b)

Question 3 Draw the graphs of a Malthusian economy in equilibrium. Vikings discover and start raiding...

Question 3 Draw the graphs of a Malthusian economy in equilibrium. Vikings discover and start raiding the coastal areas, killing and kidnapping a share of the population each year. Determine the short run impact on the equilibrium (label these with an a) Determine the long run impact on the equilibrium (label these with a b)

it's my question Graphically illustrate the equilibrium of an open economy. Discuss also the off-the equilibrium...

it's my question Graphically illustrate the equilibrium of an open economy. Discuss also the off-the equilibrium situations condition as well as the equilibrium. please do not write handwriting because I don't understand your handwriting and please explain in detail thanks

Suppose an economy is initially at long run equilibrium. Using LRAS, SRAS and AD graphs, show...

Suppose an economy is initially at long run equilibrium. Using LRAS, SRAS and AD graphs, show this initial point and label it as A. (a) Due to terrorist attacks, the consumption expenditure decreased by $150 billion. With an MPC of 0.5, illustrate this decline in consumption on the graph in (a) and also compute the impact of the decline in consumption on output level (Y). (b) If the government wants to use taxes to restore long run equilibrium, should the government...

Question 1: Suppose an economy is in equilibrium. a) Using aggregate demand and aggregate supply, illustrate...

Question 1: Suppose an economy is in equilibrium. a) Using aggregate demand and aggregate supply, illustrate the equilibrium. Do not forget to include the long-run aggregate supply. b) Now suppose the central bank decided to increase the money supply in the economy. Using the theory of liquidity preference and the money market graph, illustrate what is going to happen to the aggregate demand. c) Draw the new short-run equilibrium of the economy, as a result of the shift in aggregate...

Question 1 a) Discuss, using graphs, how the BP curve is derived. Which factors determine its...

Question 1 a) Discuss, using graphs, how the BP curve is derived. Which factors determine its slope and how? b) Ireland is a small open economy can you explain how Irish BP looks like? c) What are the factors that cause BP curve to shift and how? d) What is External Imbalance? Show in graphs. e) Assume that you have fixed exchange rates and a SOE with perfect capital mobility. Assume that you start from an external imbalance (take the...

Consider an open economy with international trade. a) Using a three-panel diagram, show the equilibrium conditions...

Consider an open economy with international trade. a) Using a three-panel diagram, show the equilibrium conditions in the market for loanable funds and market for foreign exchanges. Label your axes. Describe the demand and supply of each market. Explain how these markets are linked. b) Suppose the economy is equilibrium in both markets. Using the three-panel diagram you produced in part a), analyze the effect of President Trump’s decision to impose 15% tariffs on $112 billions of Chinese imports, effective...

Assume the U.S. is a large open economy. Use the appropriate graphs to show how a...

Assume the U.S. is a large open economy. Use the appropriate graphs to show how a decrease in taxes and an increase in government spending would affect national savings, investment, the real exchange rate, net capital outflow, net exports and the real exchange rates. Assume that the tax cuts were equal to government spending.

Discussion question #1 – Draw two graphs side-by-side that show the market equilibrium price for soy...

Discussion question #1 – Draw two graphs side-by-side that show the market equilibrium price for soy beans as $3 per pound. The second graph is for Sally the soy bean farmer whose profit maximizing output is 80 pounds of soybeans. Show on your graph Sally making a profit of $140 at the market price of $3. Label all curves you draw and clearly indicate the profit region. 1. Is the above scenario a short-run or long-run equilibrium? 2. If it...

Explain in detail. Use graphs to explain your answer wherever necessary: A small open economy that...

Explain in detail. Use graphs to explain your answer wherever necessary: A small open economy that is a net lender

Question