Question
18) IS-LM-FX Model with floating exchange rates [16 points, 1 point each unless otherwise stated.] Suppose in an economy, there is an exogenous fall in
18) IS-LM-FX Model with floating exchange rates [16 points, 1 point each unless otherwise
stated.]
Suppose in an economy, there is an exogenous fall in export demand for home goods. Answer
the following questions using the IS-LM-FX model.
- [2 points] Which schedule shifts in the IS-LM model?
- [2 points] Why? Explain.
- What happens to the equilibrium output after the change?
- What happens to the equilibrium interest rate after the change?
- What happens to the exchange rate after the change?
- Why? Explain.
- What happens to the consumer spending after the change?
- Why? Explain.
- What happens to the investment spending after the change?
- Why? Explain.
- What happens to the trade balance after the change?
- [3 points] Why? Explain.
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Business Statistics for Contemporary Decision Making
Authors: Ken Black
6th Edition
978-0470409015, 9780470559062, 470409010, 470559063, 978-0470910184
