Question
Assume that we model New Zealand as a small open economy. Economists expect that China's recent lockdown due to the zero COVID policy may reduce
Assume that we model New Zealand as a small open economy. Economists expect that China's recent lockdown due to the zero COVID policy may reduce New Zealand's net exports. How would that shock change the value of NZD and net exports in the short run? How would it change them in the long run?
Suppose, in response, the RBNZ lowers the OCR. How would that shock change the value of NZD and net exports in the short run? How would it change them in the long run?
What policy would boost New Zealand's net exports in the long run? How would such policy change the value of NZD?
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