Question

Canada is an open economy. 1- Suppose first that the spread of Coronavirus decreases consumers’ expectations...

Canada is an open economy. 1- Suppose first that the spread of Coronavirus decreases consumers’ expectations about their future income decreasing the overall level of their consumption. How does this shift affect the real exchange rate and the trade balance? Use a diagram to draw the curve shift resulting from this event and highlight its consequences on the equilibrium outcome . 2- Suppose now that the spread of the COVID reduces the Canadian exports by 15% and decreases its imports by 10% (Note that both exports and imports are given as percentages of GDP). a. What happens to Canadian real exchange rate and trade balance? (Clue: justify your answer using a diagram.) b. Canadians like to travel abroad. How will this change in the exchange rate affect them in case they are allowed to travel?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Which of the following best describes the effects of an increase in real interest rates...
1. Which of the following best describes the effects of an increase in real interest rates in Canada? a. It discourages both Canadian and foreign residents from buying Canadian assets. b. It encourages both Canadian and foreign residents to buy Canadian assets. c. It encourages Canadian residents to buy Canadian assets, but discourages foreign residents from buying Canadian assets. d. It encourages foreign residents to buy Canadian assets, but discourages Canadian residents from buying Canadian assets. ____     2.   Which of the following...
Suppose the Canadian government decides it wants to use fiscal policy to increase output and employment....
Suppose the Canadian government decides it wants to use fiscal policy to increase output and employment. With the aid of diagrams, carefully explain whether and how an increase in government spending would shift the Aggregate Demand curve in a small open economy. a) with flexible exchange rates b) with fixed exchange rates. Suppose Canada is a small open economy initially in Long Run equilibrium. Then the rest of the world reduces its demand for Canadian-produced goods. Using the AD/AS framework...
Consider an open economy. Let e denote the real exchange rate and Y denote income. Suppose...
Consider an open economy. Let e denote the real exchange rate and Y denote income. Suppose e = 1.5. Let consumption be given by C = 500 + 0.8Yd, exports be given by EX = 200 + 0.9e, and imports be given by IM = 150 + 0.2Yd - 0.5e. Finally, let domestic investment, government purchases and taxes be, respectively, I = 300, G = 200 and T = 120. 1. What is the import balance? 2. What is the...
1.Chapter 3, Question 6. Bid/Ask Spread Utah Bank’s bid price for Canadian dollars is $.7938 and...
1.Chapter 3, Question 6. Bid/Ask Spread Utah Bank’s bid price for Canadian dollars is $.7938 and its ask price is $.8100. What is the bid/ask percentage spread? 2.Chapter 3, Question 10. Indirect Exchange Rate If the direct exchange rate of the euro is $1.25, what is the euro’s indirect exchange rate? That is, what is the value of a dollar in euros? 3.Chapter 3, Question 11. Cross Exchange Rate Assume Poland’s currency (the zloty) is worth $.17 and the Japanese...
# exchange rate 1. Suppose the Federal Reserve Board unexpectedly decreases interest rates in the United...
# exchange rate 1. Suppose the Federal Reserve Board unexpectedly decreases interest rates in the United States. How will this action affect the value of the dollar in the international dollar market?(Will the dollar appreciate, depreciate or stay the same?) Graphically show the impact on the international dollar market. Label all curves and axis. 2) Rate Spot. 0.7570 1 month 0.7574 3 months. 0.7570 6 months. 0.7569 1 Year 0.7674 2 years. 0.7611 3 years. 0.7668 4 years. 0.7730 The...
1. Suppose the initial Brazilian real to US dollar exchange rate is 4 reals (or “reais”)...
1. Suppose the initial Brazilian real to US dollar exchange rate is 4 reals (or “reais”) to 1 US dollar. The cost to buy a specified market basket of same quality products is $500,000 in the U.S. and R$1,400,000 in Brazil. Valued in U.S. dollar terms, the market basket in Brazil costs $350,000. (This market basket cost represents the combined price of thousands of products, and so also indicates an average price for those products.) (a) Consider the incentives of...
22. Over what period of time is the liquidity-preference theory most relevant, and what does it...
22. Over what period of time is the liquidity-preference theory most relevant, and what does it suppose? a. short run; it supposes that the price level adjusts to bring money supply and money demand into balance b. short run; it supposes that the interest rate adjusts to bring money supply and money demand into balance c. long run; it supposes that the price level adjusts to bring money supply and money demand into balance d. long run; it supposes that...
1. The first step in any top down stock valuation is:A. economic analysis.B. an accurate stock...
1. The first step in any top down stock valuation is:A. economic analysis.B. an accurate stock market prediction.C. financial analysis.D. industry analysis. 2. Which of the following is not a goal of the federal government economic policy as established by the Employment Act of 1946?A. Low inflationB. High levels of employmentC. Balanced federal budgetsD. Economic growth 3. The most widely used tool of the Federal Reserve is: A. open-market operations (buying and selling securities for its own portfolio).B. changing the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT