Finish Assignment documents, all the information is given below 1 (a) If a country 's Central Bank is following a fixed exchange rate regime, what will the domestic interest rate be equal to (b) What is the expected rate of depreciation of the domestic currency 2 (a) If there is a balance of paymen...

Assignment 11 Unit 11 The AADD Model with Fixed Exchange Rates 1 a If a countrys Central Bank is following a fixed exchange rate regime what will the domestic interest Rate be equal to The domestic in ...

Finish Assignment documents, all the information is given below: 1. (a) If a country's Central Bank is

Question:

Finish Assignment documents, all the information is given below:
1. (a) If a country's Central Bank is following a fixed regime, what will the domestic interest rate be equal to? (b) What is the expected rate of depreciation of the domestic currency?
2. (a) If there is a balance of payments surplus on private transactions, what will happen to international reserves? (b) Will there be an expansion or contraction of the domestic money supply?
3. Suppose there is a recessionary gap and an expansion in the domestic money supply is used to increase GDP (or Y) to close this recessionary gap. Using the asset market equilibrium graphs, how will the domestic interest rate and the tend to move if there is no intervention in the foreign exchange market? If the central bank wants to maintain the original parity, will the initial change in GDP be reinforced or offset with the maintenance of the exchange parity?
4. (a) What is the Marshall-Lerner condition? (b) What is the J-curve effect?
5. What were the factors proposed in favor of flexible exchange rates?
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...