Question

Assume the emergence of the coronavirus creates a permanent increase in the perceived risk of saving...

Assume the emergence of the coronavirus creates a permanent increase in the perceived risk of saving in China. Using the small open economy model, what is the impact on:

1. China' net capital outflows? Explain.

2. The real value of China's currency in the foreign exchange market? Explain.

3. Domestic investment in China? Explain.

4. Economic growth in China? Explain.

5. How will your answers differ if you use a large open economy model instead?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Due to emergence of corona viruse the following impact will be on Chinese economy

1- Capital outflow will fall because there would be no trade between countries after resuming the trade their would see fall in capital outflow countries will avoid to Chinese investment due to their policy as he did with Sri Lanka so capital outflow will be less.

2- the real value of Chinese currency will fall due to less export of goods

3- domestic investment in china will fall due to covid.

4- Economic growth of china will fall as whole world is going through it. Chinese economy wiill also see decline in growth rate.

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
With the economic uncertainty and job insecurity due to the COVID-19 crisis, many consumers may increase...
With the economic uncertainty and job insecurity due to the COVID-19 crisis, many consumers may increase their saving as a precautionary measure. Explain in detail the predicted long-run impact of an increase in national saving on the domestic interest rate, net capital outflow, supply and demand of domestic currency and exchange rate in a large open economy, holding other factors constant. Explain your answer clearly in words. Do not provide diagrams. (125 words maximum)
13. Suppose there is an increase in government spending in a closed economy. In medium-run such...
13. Suppose there is an increase in government spending in a closed economy. In medium-run such a fiscal policy will cause: none of the other answers is correct. ambiguous effects on the neutral real interest rate the nominal wage to rise no change in the neutral real interest rate the neutral real interest rate to rise 14. Suppose the economy is initially in the steady state. According to Solow model without technological progress, an increase in the depreciation rate (δ)...
Home is a small open economy with perfect (financial) capital mobility. Initially, it is in its...
Home is a small open economy with perfect (financial) capital mobility. Initially, it is in its long-run equilibrium and domestic assets and foreign assets are prefect substitutes. Recently, the United States reformed its tax system and lowered taxes. Many believe that this kind of development might have negative impacts on the Home economy and people worry that the negative impacts include the following: Change the world interest rate (Hint: you need to figure out what happens to the world interest...
Please answer the following 5 multiple choice questions In a small open economy, when foreign governments...
Please answer the following 5 multiple choice questions In a small open economy, when foreign governments reduce national saving in their countries, the equilibrium real exchange rate (measured in units of the home currency divided by units of foreign currency): A.rises, and home country net exports rise. B.falls, and home country net exports rise. C.rises, and home country net exports fall. D.falls, and home country net exports fall. Compared to typical open-market operations, when engaging in quantitative easing operations conducted...
Assume that the world works according to the Classical model. In a small open economy, output...
Assume that the world works according to the Classical model. In a small open economy, output is produced according to a Cobb-Douglas production function, consumption is equal to C=40+0.6(Y-T) and the investment function is I=280-10r. You know that the output produced is Y=900, government spending is G=150, taxes are T=90 and that the world real interest rate is 4% (r*=4). In all the questions below, make sure to explain your answers and show all your work. a. Compute: i. Private...
Crashing Commodities Are Saving China $460 Billion a Year (Links to an external site.) Bloomberg News...
Crashing Commodities Are Saving China $460 Billion a Year (Links to an external site.) Bloomberg News January 24, 2016 — 10:01 AM CST The pain from the rout in global commodity prices is sweeping through nations from Brazil to South Africa. The biggest beneficiary? Arguably it’s China, the nation often blamed for driving prices lower due to its slowing economic growth. China’s annual savings from the commodities rout amount to $460 billion, according to calculations by Kenneth Courtis, former Asia...
Which one of the following statements is true? Select one: a. Traditional Keynesian analysis indicates that...
Which one of the following statements is true? Select one: a. Traditional Keynesian analysis indicates that increases in government purchases are a more potent tool than decreases in taxes. b. According to Keynesians, fiscal policy is the first line of defense against economic downturns. c. Advocates of sacrifice ration claim that a zero-inflation target imposes only small costs on society. d. Sacrifice ration implies that a credible commitment to reducing inflation can lower the costs of disinflation by inducing a...
Topic: Open Market Supply SHANGHAI -- Money markets are often described as the financial system's plumbing....
Topic: Open Market Supply SHANGHAI -- Money markets are often described as the financial system's plumbing. When they work, which is most of the time, hardly anyone notices, but when they get blocked up, it creates quite a stink. That is why China's money market -- in which banks and other financial institutions borrowed some $6.4 trillion from each other last month alone to fund their daily needs -- is becoming one of the world's most important markets to watch....
The crowding out effect is zero if Select one: a. the LM-curve is vertical b. the...
The crowding out effect is zero if Select one: a. the LM-curve is vertical b. the central bank conducts open market sales following fiscal expansion c. income is stimulated via a tax cut rather than an increase in government spending d. the central bank conducts open market purchases following fiscal expansion e. the LM-curve is horizontal An asset (other than money) is considered to be more liquid if Select one: a. it can be quickly and cheaply transferred into money...
Argentina and Ecuador: Understanding the Currency Crisis While fiscal policy is never far from the mind...
Argentina and Ecuador: Understanding the Currency Crisis While fiscal policy is never far from the mind of your average Argentine, who remembers the tough times and hyperinflation of the 1980s, the events of 2001 and 2002 have brought fiscal policy back to the forefront of public concern. Though the early 1990s may have been characterized by financial optimism, Argentina has been in a recession since Brazil's 1998 monetary crisis sent shockwaves across the regional and global markets. In early 2002,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT