consider the long-run impact of the increase in saving by American families, and consider the U.S....

consider the long-run impact of the increase in saving by American families, and consider the U.S. as an open economy with international trade and international capital flows. As before, assume that there is no policy response to the increased saving by American families. What would be the long run impact of the increased saving on the U.S. interest rate, on the value of the U.S. dollar, and on U.S. net exports? Explain. (use the IS-LM and AS-AD logic to answer)

Expert Solution

Impact of long run saving on interest rates -The long term saving by American families will decrease the cash flow in economy due to which the US central bank will decrease the interst rates to decrease the saving by American families.

Impact of long run saving on US dollar - The long run saving in the US economy will decreased the interest rates and due to decrease in the US interest rate the rate of return on dollars will be less due to which the investor will invest on foreign which will decrease the US dollar value.

Impact of long run saving on US exports - The long run saving by American families will decrease the value of US dollar The decrease in US dollar will increase the price competitiveness of US exports. Cheaper exports will lead to an increase in demand from foreign which will lead to increase in exports.Also due to fall in the dollar, US consumers will face increased prices of imported goods, so the growth in demand for imports will slow. It may encourage US consumers to switch to domestically produced goods.

Rahul Sunny answered 2 years ago

Assume that there is no policy response to the increased saving by American families and consider...

Assume that there is no policy response to the increased saving by American families and consider the transition from the short-run to the medium-run (the medium-run is some intermediary or a transition state between the short-run and the long-run) and back to the long run. True or False. The US will see increased inflation during the transition back to long-run equilibrium. If true, explain why. If false, explain why not. (use the IS-LM and AS-AD logic to answer)

21. In the long run an increase in the saving rate a. doesn’t change the level...

21. In the long run an increase in the saving rate a. doesn’t change the level of productivity or income. b. raises the levels of both productivity and income. c. raises the level of productivity but not the level of income. d. raises the level of income but not the level of productivity. 22. Investment from abroad a. is a way for poor countries to learn the state-of-the-art technologies developed and used in richer countries. b. is viewed by economists...

Describe a change in the U.S. tax code that might increase private saving but bot impact...

Describe a change in the U.S. tax code that might increase private saving but bot impact overall operations of the government. if this policy were implemented, how would this impact the market for loanable funds? Remember, the intent is to not impact the money availabe to operate, service the debt, and pay outlays to citizens or parties residing in the country.

Consider the short-run impact of the U.S. fiscal policy action on the economy of Mexico, a...

Consider the short-run impact of the U.S. fiscal policy action on the economy of Mexico, a small open economy with a floating exchange rate against the U.S. dollar. What is the impact of the U.S. fiscal policy action on consumption, investment, and the unemployment rate in Mexico? Explain.

Consider the short-run impact of the U.S. fiscal policy action on Bermuda, a small open economy...

Consider the short-run impact of the U.S. fiscal policy action on Bermuda, a small open economy that maintains a fixed exchange rate with the U.S. dollar. What is the impact of the U.S. fiscal policy action on consumption, investment, and the unemployment rate in Bermuda? Explain.

Consider an increase in the birth rate. Take this increase to be exogenous. Consider the impact...

Consider an increase in the birth rate. Take this increase to be exogenous. Consider the impact in the Malthusian model. What is the initial impact on per capita income? What is the initial impact on the growth rate in per capita income? Explain the effects on per capita income and the growth rate in per capita income in the long run. Support your answers graphically.

Compare the impact of an increase in the government's budget deficit on national saving, interest rate...

Compare the impact of an increase in the government's budget deficit on national saving, interest rate and investment spending in two cases: a small open economy and a closed economy. The two economies are otherwise comparable. Assume prices are flexible and that factors of production are fully employed in both economies. Assume there is perfect capital mobility for the small open economy. (125 words maximum)

Discuss how tariffs and quotas impact short run and long run trade equilibrium.

What is the impact of money growth on economy (short run, adjustment period and long run)?

Use the AD-AS diagram to graphically illustrate the short-run and long run impacts of an increase...

Use the AD-AS diagram to graphically illustrate the short-run and long run impacts of an increase in taxes on the price level and income. Write down the impact of this policy on income, interest rate, unemployment and investment. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium levels; iv. the direction the curves shift; and v. the new short-run and long-run equilibriums.

Question