Illustrate and explain the impact on the real exchange rate and the trade balance due to: (a) A successful campaign encourage residents to "buy local" (b) A reduction in remittances from family overseas due to the world economic recession. (c) Excessive snowstorms during winter encourage tourist arrivals. d) An increase in the real interest rate

Illustrate and explain the impact on the real exchange rate and the trade balance due to: (a) A successful campaign encourage residents to "buy local" (b) A reduction in remittances from family overseas due to the world economic recession. (c) Excessive snowstorms during winter encourage tourist arrivals. d) An increase in the real interest rate

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 43P: In 2001, the United Kingdoms economy exported goods worth 192 billion and services worth another 77...

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(A) Government spending rises to 1,250. Compute the investment, trade balance, national savings and the equilibrium exchange rate and illustrate graphically. (B) Suppose that the world interest rate rises from 5 to 10 percent (G is again 1,000). Solve for national saving, investmentm trade balance and the equilibrium exchange rate. Explain what you find compared to part (A) and explain graphically.
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What is the impact of each of the following changes (other variables remaining unchanged) on the real exchange rate. (a) The Consumer Price Index (which measures the price level) in the United States rises by 4 percent. (b) The Consumer Price Index in Jamaica rises by 9 percent. (c) The two Consumer Price Index changes above occur at the same time. (d) The nominal exchange rate moves from 86 to 90 for a U.S. dollar. (e) The nominal exchange rate depreciates by 10 percent at the same time that local inflation is 10 percent and the U.S. price level is stable.
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