Explain in a paragraph, If a country experiences an increase in
inflation relative to other countries,...
Explain in a paragraph, If a country experiences an increase in
inflation relative to other countries, then their current account
will increase.
Solutions
Expert Solution
in a nutshell
high inflation leads to weaker of local currency compare to
other countries. foreign exchange rate decrease with others
countries therefore leads to fiscal deficit.and current account
will increase
Explain in a paragraph, There is speculation that the U.S. will
experience higher relative inflation rates over the following 24
months or longer. Explain fully how this would influence the USD in
foreign exchange markets. Would the dollar be stronger?
A country has a lower inflation rate than all other
countries. It has more rapid economic growth. The central bank does
not intervene in the foreign exchange market. What can you say (and
why) about:
The exchange rate?
The current account balance?
The expected exchange rate?
The interest rate differential?
Interest rate parity?
Purchasing power parity?
You observe two countries. One country is a bottom billion
country and an other is a richer European country. You see that GDP
per capita grew much faster over the last ten years. Describe how
this result could be consistent with both the Solow and Romer
model. What would have to be true about the relative savings and
population growth in the Solow model for this result to occur?
Assume that the China inflation rate becomes high relative to
Japan inflation. Other things being equal, how should this affect
the (a) China demand for Japanese Yen,
(b) supply of Japanese Yen for sale,
and (c) equilibrium value of the Japanese Yen ? Explain and show it
graphically also.
(Points:3)
Further, assume China interest rates fall relative to British
interest rates. Other things being equal, how should this affect
the (a) China demand for British pounds, (b) supply of pounds...
Read the following paragraph and answer question 44. Country
Hippo experiences a high level of unemployment and there are few
jobs that people can compete for. About 50% of those unemployed
have been looking for work for a year or longer. There are several
reasons why people choose to not seek employment. The government
decided to help unemployed people by increasing unemployment
benefits. 44. Which one of the following statements is correct? 1.
There will be an upward movement along...
Country C is a farming country. Country C imports fertilizers
from other countries. Price of fertilizers increases temporarily.
Answer each of the following parts.
Draw an AD-AS graph to show the long-run equilibrium before the
increase in price of fertilizers.
On your graph for part (a), show what happens to AD, SRAS and
LRAS in short run.
In short run after the increase in the price of fertilizers,
does the unemployment rate increase? Does the real GDP
increase?
Does the...
Question 47 A simultaneous increase in inflation and decrease in economic growth in a country can be associated with: a decrease in aggregate demand with no change in aggregate supply. an increase in aggregate demand and aggregate supply. an increase in aggregate supply with no change in aggregate demand. a decrease in aggregate supply and aggregate demand. a decrease in aggregate supply with no change in aggregate demand. Question 48 As the level of real GDP increases, the short-run aggregate supply curve: shifts...
1. Assuming Country OZ experiences high rate of inflation,
discuss whether money will still be able to perform all its
functions effectively in Country OZ.
2. Inflation is more likely to be caused by a shift in an
economy’s aggregate demand rather than a shift in its aggregate
supply. Discuss the given statement.