Show and analyze the effects of a decline in exports on: - Domestic Economy (income and...
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Show and analyze the effects of a decline in exports on: - Domestic Economy (income and interest rate); - Balance of Payments and - Exchange Rate within the Mundell-Fleming Model under: a) - Fixed Exchange Rate Regime and for the Imperfect and Perfect Capital Mobility situations. b) - Flexible Exchange Rate Regime and for the Imperfect and Perfect Capital Mobility situations. While answering this question: - Draw diagrams for different exchange rate regimes and capital mobility situations. - Assume that interest elasticity of international capital is higher than interest elasticity of domestic money demand. -Diagrams should be clear and understandable; shifting parameters should be specified for each case. - Compare the results and write your brief comments on them. - Focus on the effect on income. Is this effect larger under fixed or flexible exchange rates? Why? Show and analyze the effects of a decline in exports on: - Domestic Economy (income and interest rate); - Balance of Payments and - Exchange Rate within the Mundell-Fleming Model under: a) - Fixed Exchange Rate Regime and for the Imperfect and Perfect Capital Mobility situations. b) - Flexible Exchange Rate Regime and for the Imperfect and Perfect Capital Mobility situations. While answering this question: - Draw diagrams for different exchange rate regimes and capital mobility situations. - Assume that interest elasticity of international capital is higher than interest elasticity of domestic money demand. -Diagrams should be clear and understandable; shifting parameters should be specified for each case. - Compare the results and write your brief comments on them. - Focus on the effect on income. Is this effect larger under fixed or flexible exchange rates? Why?
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The effects of a decline in exports on the domestic economy balance of payments and exchange rate within the MundellFleming Model depend on the exchange rate regime fixed or flexible and the level of ... View the full answer
Related Book For
Macroeconomics
ISBN: 978-1464168505
5th Canadian Edition
Authors: N. Gregory Mankiw, William M. Scarth
Posted Date:
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