Fully explain the effects on equilibrium output, interest rates, and the exchange rate from an increase...

Fully explain the effects on equilibrium output, interest rates, and the exchange rate from an increase in net exports under fixed and flexible exchange rates with mobile and immobile capital. (Include graphs)

Solutions

Expert Solution

With an increase in domestic price level under fixed exchange rate with mobile capital situation will be as mention in graphs. As with fixed exchange rate, more capital inflow will take place, it will increase the investment as the existing interest rate economy with constant exchange rate will be taken more growth and increase in investment will increase in domestic output interest rate will be same and exchange rate will it is situation under fiscal policy measures so it is very effective.

Is curve shift from IS1 to IS2as interest rate rise due to increase in price level. It will increase the domestic output and foreign capital inflow at the high er interest rate at higher rate of interest capitulation flow rise and will lead to use in export proportion due to increase exchange rate but increase in investment will by the interest rate to its small interest rATE SO AT THE CONSTANT RATE OF INTEREST output will increase so it is effective extubation under is cal policy assumed here.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Fully explain the effects on equilibrium output, interest rates, and the exchange rate from a decrease...

Fully explain the effects on equilibrium output, interest rates, and the exchange rate from a decrease in the domestic price level. (Include graphs)

Fully explain the effects on (domestic) equilibrium output, interest rates, and the exchange rate from an...

Fully explain the effects on (domestic) equilibrium output, interest rates, and the exchange rate from an increase in the foreign country’s money supply under fixed and flexible exchange rates with mobile and immobile capital.(Include Graphs)

Fully explain the effects of an increase in the expected future exchange rate on the spot...

Fully explain the effects of an increase in the expected future exchange rate on the spot exchange rate under both fixed and flexible exchange rate regimes (include the effects on the BOP, FX market, and domestic and foreign returns).

Examine the effects of a decrease in foreign output and foreign interest rate underflexible exchange rate...

Examine the effects of a decrease in foreign output and foreign interest rate underflexible exchange rate regime when the goal of the central bank is to achieve output stability (Hint: Use Mundell-Fleming model) What happens to the components of demand?

Examine the effects of a decrease in foreign output and foreign interest rate under flexible-exchange rate...

Examine the effects of a decrease in foreign output and foreign interest rate under flexible-exchange rate regime when the goal of the central bank is to achieve output stability(Hint: Use Mundell-Fleming model) .What happens to the components of demand?

Examine the effects of a decrease in foreign output and foreign interest rate under flexible exchange...

Examine the effects of a decrease in foreign output and foreign interest rate under flexible exchange rate regime when the goal of the central bank is to achieve output stability (Hint: Use Mundell - Fleming model). What happens to the components of demand? draw the relevant graph

Q1)Examine the effects of a decrease in foreign output and foreign interest rate underflexible-exchange rate regime...

Q1)Examine the effects of a decrease in foreign output and foreign interest rate underflexible-exchange rate regime when the goal of the central bank is to achieve outputstability (Hint: Use Mundell-Fleming model).What happens to the components ofdemand?

Explain conditions that cause exchange rates to fluctuate. What are some effects of exchange rate fluctuation?...

Explain conditions that cause exchange rates to fluctuate. What are some effects of exchange rate fluctuation? Please post with 200+ words.

Question 1 a) Explain the effect on the equilibrium interest rate and output level of an...

Question 1 a) Explain the effect on the equilibrium interest rate and output level of an increase in the real money supply, state if this is an contractionary monetary or fiscal policy and show the effect graphically. fully label the graph (10) b) Explain the effect on the equilibrium interest rate and output level of a decrease in taxation. State if this is an expansionary or contractionary monetary or fiscal policy and show the effect graphically. (10)

Explain the effects of a “sudden stop” (an external shock such as increase in interest rate)...

Explain the effects of a “sudden stop” (an external shock such as increase in interest rate) on domestic unemployment, wages, and prices in the tradeable and non-tradeable sector in a country that is a member of a monetary union (for example, Greece or Spain as members of the European Union).

Subjects