Question: In the classical model which includes Net exports how does a fall in taxes increase exchange rates ? Include NX and Exchange rate diagram We

In the classical model which includes Net exports how does a fall in taxes increase exchange rates ? Include NX and Exchange rate diagram We know that a fall in tax increases consumption however due to C increasing NS=Y-C-G falls even more due to consumption increasing. So how does this then lead to exchange rate rising

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

1.All of the following, except one, would cause the aggregate demand curve to shift to the right. Which is the exception? A)An increase in taxes B)An increase in government spending on goods and...

14. A) B) D) . In the short-run model of a small open economy, net exports depend on the exchange rate, where the exchange rate 1s defined as the amount of currency per unit of currency. negatively;...

A.. The short-run aggregate supply curve may shift to the left if: a inflationary expectations increase. b productivity increases. c government spending increases. d personal income taxes decrease. e...

KKindly help tutors EXERCISE Question 1 (IS Curve and Short-run Fluctuation) The IS Curve shows the relationship between short-run output (Y,) and real interest rate (R,) on horizontal and vertical...

7. In the Mundell-Fleming model, the domestic interest rate is determined by the: A) intersection of the LM and IS curves. B) domestic rate of inflation. C) world rate of inflation. D) world interest...

1. Answer this question below Why is money important? Explain function and types of money. Briefly explain the purpose of an AD dnd AS curve and describe the characteristics of a typical AD and AS...

Chapter 12:12.3 #4 (p. 305) What kinds of risk are included in investment risk? Go online to survey current or recent financial news. Find and present a specific example of the impact of each type of...

ECO 202 Assessment Problem: In this essay you will be asked to reflect the following issues using the supply and demand model. 1. There are two important inputs in the production of lattes: coffee...

Suppose a small open economy can be described by the following set of equations: Long-run output: YFE = 48000 Consumption: C = 11250 + 0.75(Y - T) - 2000r Investment: I = 13500 - 1500r Net exports:...

Electrical, chemical, industrial, and mechanical engineering curricula were studied. It was found that some students took no statistics, some took one semester, and others took two semesters....

Anns electric clothes dryer was unreliable, and she sought a replacement. She noticed an advertisement in the newspaper for a used dryer, in like-new condition, at a price of $200. She visited the...

Question 8 ? 1 When, if ever, will the geometric average return exceed the arithmetic average return for a given set of returns? When the set of relurns has a wide frequescy dintribution Nrytr When...

Companies like McDonald's, who place their stores in as many location as possible, are using a strategy called q , distribution. a ) selective b ) exclusive c ) direct d ) intensive

10. First test yourself and then let another member of the group test you in relation to the following questions. If deviations occur, discuss why this might be. What can the results of this test be...

5. Based on your desired future, answer the following questions: (a) What do you want, i.e. what goals have you set yourself? Set up three goals in order of priority. (b) Why do you want this? (c)...

1. Discuss the following statements: (a) Its what you are best at that will be your downfall. (b) How can we learn but not learn? (c) Learning to see is different from seeing. (d) Creativity is...