Question

In: Economics

Suppose an earthquake happened in a foreign country which is large enough to make significant changes...

Suppose an earthquake happened in a foreign country which is large enough to make significant changes in world financial markets. This earthquake led to significant amount of casualties in the country without much effect on the capital stock. What should be the effect of this on price level, real exchange rate, and nominal exchange rate of our small domestic economy in long run and from long run to very-long run? Explain in detail by showing the changes in the relevant markets.

Solutions

Expert Solution


Related Solutions

) Suppose an earthquake happened in a foreign country which is large enough to make significant...
) Suppose an earthquake happened in a foreign country which is large enough to make significant changes in world financial markets. This earthquake led to significant amount of casualties in the country without much effect on the capital stock. What should be the effect of this on price level, real exchange rate, and nominal exchange rate of our small domestic economy in long run and from long run to very-long run? Explain in detail by showing the changes in the...
Suppose the country risk premium of a large foreign country increased permanently. What happens to price...
Suppose the country risk premium of a large foreign country increased permanently. What happens to price level, nominal exchange rate, real exchange rate, investment, net exports and consumption in the domestic country in long run? Assume that the country is operating under floating exchange rate system.
If a tariff is imposed by a country that is large enough to have market power...
If a tariff is imposed by a country that is large enough to have market power in global markets, the domestic consumer will face a domestic price ________ than the world price for the product, and this world price will be ________ by the tariff.
Suppose that the liquidity preferences for the home country h and foreign country f are both...
Suppose that the liquidity preferences for the home country h and foreign country f are both fixed (i.e. they are not a function of the interest rate, i.e. you can ignore the interest rate in this question). The real GDP growth rates of countries h and f are both 0. The nominal money supply growth rate of the foreign country f is also 0. The nominal money supply growth of the home country h is initially 3%, until time T,...
Natural disasters: Suppose a large earthquake destroys many houses and buildings on the West Coast but...
Natural disasters: Suppose a large earthquake destroys many houses and buildings on the West Coast but fortunately results in little loss of life. Show how to think about this event using the IS curve. Explain how actual output, potential output, and short-run output are affected in the short run, and why.
Suppose that home country A has the following transactions with foreign country B. For each transaction,...
Suppose that home country A has the following transactions with foreign country B. For each transaction, indicate and explain the appropriate debit and credit entry in A’s balance-of payments accounts. a) A firm in country A sells $9,000 of iron & copper to a country B firm. Payment is made by the firm in B drawing down its checking account in a country A commercial bank. b) An importer in country A buys $5,000 of apparel from a country-B supplier,...
Suppose that home country A has the following transactions with foreign country B. For each transaction,...
Suppose that home country A has the following transactions with foreign country B. For each transaction, indicate and explain the appropriate debit and credit entry in A’s balance-ofpayments accounts. a) A firm in country A sells $9,000 of iron & copper to a country B firm. Payment is made by the firm in B drawing down its checking account in a country A commercial bank. b) An importer in country A buys $5,000 of apparel from a country-B supplier, paying...
Suppose that home country A has the following recorded transactions with foreign country B. Following the...
Suppose that home country A has the following recorded transactions with foreign country B. Following the example below, for each transaction, indicate which item is a debit and which item is a credit (in Country A’s the balance of payments) and how the item would be identified in the balance of payments. Example: An importer in country A buys $8,000 of apparel from a country-B supplier, paying for the goods by writing a check to be deposited into the B...
Suppose a country experiences a significant immigration of labor. Further, this country produces both labor-intensive and...
Suppose a country experiences a significant immigration of labor. Further, this country produces both labor-intensive and capital intensive goods. According to the Rybczynski theorem, what changes in the production of the two type of goods should we anticipate because of the labor immigration? Be sure to use the Rybczynski theorem to answer the question.
Suppose a country is large in the market for a particular good. There, the demand is...
Suppose a country is large in the market for a particular good. There, the demand is D = 9000 - 30P and the supply is S = -1000 + 10P. Moreover, when there is trade, this country is an importer, the import demand being MD = 10000 - 40P and the export supply being XS = -3000 + 60P. 1) In the absence of tariff, what is the total welfare in this country when there is trade? 2) What is...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT