In the open-economy IS-LM model, an increase in the domestic interest rater will, other things equal, cause domestic investment to and the trade balance to O increase; increase decrease; increase increase; decrease O decrease; decrease

In the open-economy IS-LM model, an increase in the domestic interest rater will, other things equal, cause domestic investment to and the trade balance to O increase; increase decrease; increase increase; decrease O decrease; decrease

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 46P: Imagine that the economy of Germany finds itself in the following situation: the government budget...

See similar textbooks

Related questions

Q: Clothing R 30 Food Entertainment 2021 Price R 125 R5 2021 Quantity 45 15 8. 2022 Price R 140 R 45 R8…

A: Formulas: 1. CPI = (Cost of basket of goods in current year / Cost of basket of goods in base year)…

Q: All of the following are likely results of a positive demand shock EXCEPT Select one: higher…

A: Positive demand shock increases the aggregate demand.

Q: Describe the factors that limit the precision of the central bank’s control off the money supply and…

A: The central bank is the federal reserve of the country. The money supply is controlled by the…

Q: A machine costs $15000 and has a maintenance cost $1000 per year and a salvage value of $2500 after…

A: Life cycle cost = Cost of the machine + Present value of maintenance cost - Present value of salvage…

Q: Determine whether demand for each of the following product is either price elastic or price…

A: Since you have posted a question with multiple sub-parts, we will solve first three subpart for you.…

Q: What change in the budget deficit will cause the trade deficit to increase, all else the same? A)…

A: the relationship between the budget deficit and trade deficit is that when government creates a…

Q: Reserve Checkable Actual Excess Requirement (%)| Deposits Reserves Reserves (1) W $100,000 $10,000…

A: The fund amount held by the bank in reserves for ensuring that it is able to meet liabilities when…

Q: 16. Explain why net exports and the real exchange rate have an inverse relationship. Why do NXs…

A: Relationship between real exchange rate and net export:- The price level of items at domestic nation…

Q: _10. Assuming a player is not part of a union, the player is better off if the goods et is A)…

A: Competitive Market: A competitive market is a market where a large number of firms exist and each…

Q: Which of the following groups is protected from a sudden increase in inflation? a) Borrowers who…

A: Inflation is the gradual loss of buying power of a currency.An economy's average price level of a…

Q: 3.45 Today, an engineer deposited $10,000 into an ac- count that pays interest at 8% per year…

A: Calculate the Future Value of $10,000 for months 2, 11, and 23, then subtract $1000 from each.…

Q: If there is diminishing marginal utility, and the price of labor goes up, you supply more labor.…

A: Here, it is given that the market holds the law of diminishing marginal utility and at the same…

Q: Which perspective is better suited to handling the inflation we face today? Keynesian or…

A: Finding a balance between Keynesian and Neoclassical models is like to riding two horses at the same…

Q: Let GDP (Gross Domestic Product) as a simplification, only be one good, apples. Find the 100 and…

A: GDP refers to the value of goods and services produce in a country during a year within the domestic…

Q: 1.7 Read the following extract and answer the question that follows. Construction data fudging kills…

A: Answer: (1.7). The given extract talks about the mismanagement in data collection and compilation by…

Q: Economics 33. Is the following statement true or false? Explain. In a duopoly, ceteris paribus,…

A: Collusion is when two or more businesses make a deal that is against the law to limit competition.…

Q: For a small open economy with a fixed exchange rate: а. monetary policy is effective and fiscal…

A: In the international market, there are two types of exchange rate system that are fixed exchange…

Q: Which of the following statements are true? In theory and practice government bonds are equivalent…

A: In an economy, government bonds refers to the monetary instrument that is used by the government to…

Q: Given your answer to the previous question, fill in the blanks to make this a correct sentence:…

A: There are two types of GDP: real GDP and Nominal GDP. The Nominal GDP is the money value of goods…

Q: The demand for a monopolist's output is 6,000/(p + 7)2, where p is the price it charges. At a price…

A: Given:- Demand- 6000/(p+7)2 Price=$4 To calculate:- Elasticity of demand=? Please find the images…

Q: 2. Demand-pull inflation can occur when… a) There is a shortage of investment and investors bid up…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: This question concerns the mechanism of a reserve currency standard. Two countries, X and Y, have…

A: Given that; There are two countries, X and Y, their currencies are X and Y. Suppose the exchange…

Q: 3. Consider the following degenerate game. Please find all the pure and mixed strategy Nash…

A: Pure Strategy Nash Equilibrium : When Player 1 plays L, the best response of Player 2 will be to…

Q: The reserve-requirement ratio Multiple Choice is raised for banks that frequently use the Federal…

A: At the marketplace, required reserve ratio refers to the percentage of total deposits that a bank…

Q: When money is used as medium of exchange A. the need for a barter system diminishes B. the cost of…

A: In an economy, when money is used as the medium of exchange, it is the situation when purchasing a…

Q: our company charges $60 for a board game it invented and has sold 3,000 copies during the last year.…

A: Following are the given values: Price charged by the company = $60 Number of copies sold = 3000…

Q: Figure: Coffee Trade Domestic Price of Coffee supply $9.50 World 6.00 price World supply Domestic…

A: The world price is below the equilibrium price where quantity demanded is greater than quantity…

Q: The following table represents the potential monthly output (Q), number of workers (L), marginal…

Q: A firm produces output (y) using two inputs, labor (L) and capital (K), according to the following…

A: We have cobb Douglas production function y = f(L, K) = L0.25 K0.75 And L =120 and K=60

Q: Derive the output elasticity of labour for the following further alternative production function:…

A: Output elasticity measures a percentage change in output due to percentage change in inputs. Whereas…

Q: Discuss the following statements: a. The Keynesian multiplier is higher the higher is the degree of…

A: A Keynesian multiplier is stated that the total effect is more than the dollar that is spent by the…

Q: 1. Firms competing in an oligopoly could essentially cooperate a. and act as one monopolist and…

A: Note:- Since we can only answer one question at a time, we'll answer the first one. Please repost…

Q: An American purchases a case of Jaffa Cakes which are produced in the United Kingdom. How do the…

A: Gross domestic product refers to the total monetary or market value of all the final goods and…

Q: John consumes only books (good on X axis) and DVDS (good on Y axis). At his current consumption…

A: Consumer equilibrium is that point where a consumer get maximum satisfaction by spending their…

Q: Economies to scale refer to

A: Companies benefit from economies of scale as manufacturing gets more efficient.Economies of scale…

Q: Inflation targeting a strategy in which the central bank pursues a. a certain numerical…

A: Central Bank implements monetary policy for different purposes according to the needs of the economy…

Q: syndicate wishes to purchase an oil well which estimates indicate, will produce a net income of P2M…

A: *Answer: Given that syndicate wishes to purchase an oil well which estimates indicate, will produce…

Q: suppose that the snow shovel industry is a perfectly competitive, increasing cost industry and the…

A: The price of a good or service in a commercial center decides the quantity that purchasers request.…

Q: A businesswoman owns a factory that produces drill bits. A piece of machinery costs $45,000 and has…

A: A businesswoman owns a factory that produces drill bits. A piece of machinery costs $45,000 and has…

Q: Putting Virtual Reality on the Market: Is It Possible?

A: virtual reality markets include brands advancing themselves and their items by utilizing virtual and…

Q: In a country with a population of 70 million people, there are 30 million children under the age of…

A: Introduction : Unemployment rate- unemployed people/labour force x 100

Q: What change in the budget deficit will cause the trade deficit to increase, all else the same? A)…

A: A budget basically refers to an estimate of future income and spending that is generally prepared…

Q: If a person moves $1,000 from a small-denomination time deposit to a demand deposit account, Select…

A: M1 definition of money supply: M1 money supply includes cash (i.e., coins and currency), checkable…

Q: Q1. If the nominal GDP rises by 6 percent and the price level rises by 3 percent, then the real GDP…

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…

Q: Restaurant Pricing. Consider a restaurant that charges S20 for all you can eat and has 20 customers…

Q: A $50,000, 80-day Province of Ontario T-bill was issued 34 days ago. What will the T-bill sell at…

A: T-Bill means a short-term instrument of the money market.

Q: Economics 33. Is the following statement true or false? Explain. In a duopoly, ceteris paribus,…

A: Collusion occurs when two or more businesses form an illegal agreement to restrict competition.Price…

Q: (i) Qa =10 – 2P, Q = -4 + 3P.1

A: Given:- Demand function: Qdt=10-2P1 Supply function: Qst=-4+3Pt-1 To determine:- intertemporal…

Q: for its output when maximizing profit. In the above figure, a monopoly should charge $ O $10 O $20…

A: Monopoly refers to the situation where there is one seller in the market. In conventional economic…

Q: Now let income change by 100. What will be the value of the constant term in the new Qd equation and…

A: The equilibrium price is the only price where the plans of consumers and the plans of producers…

Question

In the open-economy IS-LM model, an increase in the domestic interest raterwill, other things
equal, cause domestic investment to
and the trade balance to
O increase; increase
decrease; increase
increase; decrease
O decrease; decrease

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Suppose the United States decides to subsidize theexport of U.S. agricultural products, but it does notincrease taxes or decrease any other governmentspending to offset this expenditure. Using a threepanel diagram, show what happens to nationalsaving, domestic investment, net capital outflow, theinterest rate, the exchange rate, and the trade balance.Also explain in words how this U.S. policy affects theamount of imports, exports, and net exports.
ProblemYou are given the following information about an open economyGross private domestic investment:40Government purchases of goods and services:30Gross national product(GNP):200Current account balance:-20Taxes:60Government transfer payment to the domestic private sector:25Interest payments from the government to the domestic privatesector:15Factor in come received from the rest of the world:7Factor payments made to the rest of the world:9Calculate the following:a)Consumptionb)NetExportsc)GDPd)Net factor payments from abroade)Private savings (f) Government savings (g) National savings
Suppose that Americans decide to increase theirsaving.a. If the elasticity of U.S. net capital outflow withrespect to the real interest rate is very high, willthis increase in private saving have a large orsmall effect on U.S. domestic investment?b. If the elasticity of U.S. exports with respect to thereal exchange rate is very low, will this increase inprivate saving have a large or small effect on theU.S. real exchange rate?
A case study in the chapter analyzed purchasingpower parity for several countries using the pricc ofBig Macs. Here arc data for a few more countries: a. For each country, compute the predicted exchangerate of the local currency per U.S. dollar. (Recallthat the U.S. price o( a Big Mac was $4.93.)b. According to purchasing-power parity, what is thepredicted exchange rate between the Hungarianforint and the Canadian dollar? What is the actualexchange rate?c. How well docs the theory of purchasing-powerparity explain exchange rates?
If a country is running a government budget surplus, why is (T - G) on the left side of the saving-investment identity?
Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1 of Germanys GDP; private savings is 20 of GDP; and physical investment is 18 of GDP. Based on the national saving and investment identity, what is the current account balance? If the government budget surplus falls to zero, how will this affect the current account balance?
Explain briefly whether each of the following would be more likely to lead to a higher level of trade for an economy, or a greater imbalance of trade for an economy. Living In an especially large country Having a domestic investment rate much higher than the domestic savings rate Having many other large economies geographically nearby Having an especially large budget deficit Having countries with a tradition of strong protectionist legislation shutting out imports
Evaluate the following statement: "if lower exchange rates increase a nation's exports, the govermment should do everything in its power to anure that the exchange rate for its cumency is an low as it can possbly be This statement does nat acknowledge that lower exchange rates OA couid result in a reluctance from other countries to accept this nation's currency for payment of any goodn or services OB. could make a currency virtually worthless. O C. make a nation's imports more expensive. COD. None of the above responses are acknowledged by the statement.
If the price level recently increased by 19% in Englandwhile falling by 6% in the Canada, by how much mustthe exchange rate change if PPP holds? Assume that thecurrent exchange rate is 0.58 pound per dollar
In an open economy, a permanent beneficial suply shock (s< 0)implie tha the domestic real exchange rate wil: Oappreciate as the est of the word buys the domestic curency Oremain unchanged because of fsetig movements n he domestic prie level Oremain unchanged because of ffseting movements in realinteret rates Odepreciate so as to crowd-in net exports
In the open circular flow diagram, O a. Domestic Savings - Domestic Investment = Trade Balance Ob. Domestic Savings- Domestic Investment = Foreign Investment Oc. Domestic Savings- Domestic Investment = Foreign Savings Od. Domestic Savings - Domestic Investment = Trade Deficit
Consider a country with a flexible exchange rate, and which initially has a current account surplus of zero. Then, suppose there IS an anticipated InCrease in tuture total tactor productivity. a) Determine the eauilibrium etects on the domestic economv in the case where there are no capita. controls. In particular, show that there will be a current account dehicit when arms and consumers anticipate the increase in future total factor productivity. b) Now, suppose that the government dislikes current account deficits, and that It imposes capital controls in an attempt to reduce the current account deficit. With the anticipated increase in future total factor productivity, what will be the equilibrium efects on the economy? Do the capital controls have the desired efect on the current account deficit? Do capital controls dampen the effects of the shock to the economy on output and the exchange rate? Are capital controls sound macroeconomic policy in this context? Why or why not?