Question

Answer the following intermediate macroeconomics questions: a) suppose that the economy of Chile is a small...

Answer the following intermediate macroeconomics questions:

a) suppose that the economy of Chile is a small open economy. Suddenly, a change in world fashions makes the exports of Chile unpopular.

i. What happens to the national savings in Chile, investments, net exports, the interest rate and the exchange rate?

ii. The citizens of Chile like to travel abroad. How will this change in the exchange rate affect them?

iii. The fiscal policymakers of Chile want to adjust fiscal policy to maintain the exchange rate at its previous level. What would they do specifically? If they do this, what are the overall effects on savings, investments, net exports and the interest rate?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. Chile economy :-

  • National saving - decrease as people have to buy at high price
  • Investment - decrease
  • Net exports - decrease
  • Interest rate - increase
  • Exchange rate - increase

2. This change is exchange rate will lead to inflation in tte country. They will have to buy products at higher cost.

3. The fiscal policymakers have to increase there borrowing or reduce tax rates. the overall effect will be :-

  • Saving - decrease
  • Investment - increase
  • Net exports - increase
  • Interest rate - decrease
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
Answer the following Intermediate Macroeconomics questions: a) Suppose that the large open economy conducts a contractionary...
Answer the following Intermediate Macroeconomics questions: a) Suppose that the large open economy conducts a contractionary fiscal policy (i.e., raising taxes and decreasing government spending), illustrate graphically how the small open economy would be impacted. In your graphs, labeled all your graphs correctly and all terminal equilibrium points and values. b) Based on your graphical analysis, explain briefly what happens to the small open economy net exports, investments, national savings.
A small open economy is described by the following equations: C = 50 + .75(Y -...
A small open economy is described by the following equations: C = 50 + .75(Y - T) I = 200 - 20i NX = 200 - 50E M/P = Y - 40i G = 200 T = 200 M = 3000 P=3 i* = 5 b. Assume a floating exchange rate and constant expectations. Calculate what happens to the exchange rate, the level of income, net exports, and the money supply if the government increases its spending by 50. Use...
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...
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...
Suppose that Jamaica is a small, open economy. A war breaks out abroad and, as a...
Suppose that Jamaica is a small, open economy. A war breaks out abroad and, as a result, Jamaican firms become uncertain about the future and decide to delay some investment projects. 1) Explain what effect this event would have on the Jamaican economy. You do not need to draw the graph, but you do need to describe which curves move and in what direction. No points will be given for answers without an explanation. 2) How would the following variables...
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...
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)...
Scenario 14-1 The economy is in long-run equilibrium. Suddenly, due to improved international relations and the...
Scenario 14-1 The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time. ____ 19.   Refer to the Scenario 14-1. In the short run, which of the following describes the changes that take place in the economy? a. Both the price level and real GDP rise. b. Both the price level and real GDP fall. c. The price...
For questions 1 through 9, suppose the structure of an economy with a flexible exchange rates...
For questions 1 through 9, suppose the structure of an economy with a flexible exchange rates is represented by the following equations: C = 400 + 0.85*(Y – T) L(r, Y) = 0.25*Y – 25*r T = 200 MS /P = 2250 I = 1700 – 25*r G = 1800 NX = 900 – 200*e where e represents the real exchange rate 1. Intuitively, the real exchange rate affects net exports (NX) (a) negatively because real depreciations (e↓) make domestic...
Consider an economy in which taxes, planned investment, government spending on goods and services, and net...
Consider an economy in which taxes, planned investment, government spending on goods and services, and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports: Ca = 1,500 – 10r; c = 0.6; Ta = 1,800; Ip = 2,400 – 50r; G = 2,000; NX = -200 (a)Derive Ep and...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT