fr answer all

A) Consider a closed economy large country (e.g., the US) that sustains Y1 and Y2 shocks, where Y2 increases by more than Y1. In the intertemporal model, its autarkic interest rate will __, and its price level will ____.

fall, rise

rise, fall

change ambiguously, fall

rise, change ambiguously

b) Given these shocks, now presume the US open up to trade with the rest of the world. There are no shocks in other countries. Then, the world interest rate r* will ___ and the US interest rate will ____ relative to its autarkic levels.

rise, rise

rise, fall

fall, fall

fall, rise

c) In this open-economy setting, US will have a current account ___, will ___ abroad, and ___ their holdings of the international currency H.

deficit, lend, decrease

surplus, lend, increase

surplus, borrow, decrease

deficit, borrow, increase

d) As a result of the US shock, Canada - a small country with no shocks - will have a current account __, ___ abroad, and ____ their holdings of the international currency H.

surplus, lend, decrease

deficit, lend, increase

surplus, borrow, decrease

deficit, borrow, increase

e) Now consider the same type of shocks in the gold standard model. Fixed exchange rates are assumed and the US is assumed to be 50% of the world. There are no shocks elsewhere. Presume that the US's Y1 increases by 3% while its Y2 increases by 5%. The result is that the US increases its ___, and runs a current account ___.

next exports, could be either deficit/surplus

net imports, deficit

net imports, neither a deficit or surplus

net exports, surplus

f) Given the above numbers, prices initially change by _ in the US; world prices change by _. Countries other than the US are net _____ of gold.

-2%, -2%, suppliers

-2%, -1%, recipients

2%, 2%, suppliers

2%, 1%, recipients

g) Now suppose the US wished to maintain its prices after the shock - by sterilization. If successful, world prices would change by __ and countries other than the US would ___ more gold than in the original problem. The US gold reserve would ____.

2%, lose, decrease

1%, gain, increase

2%, gain, decrease

0%, lose, increase

h) In a 2-country version of this problem, where US is the 'large' foreign country and Canada is the small domestic economy, the adjustment to the US shock is of the form:

ABA

ABD

ABC

i) If we assumed flexible exchange rates in this setting, the Canadian dollar would __.

appreciate

remain constant

depreciate

a) Suppose that the US is currently in a balance of payments equilibrium and receives shocks that reduce both Y1 and Y2 by 3%. In the intertemporal model, the US balance of payments moves into ___ and world prices P* ___.

deficit, rise

surplus, rise

does not change, rise

deficit, fall

b) In the gold standard model, two large economies have negative correlation in their business cycles. D sustains a 1% increase in output in Y1, and 2% decrease in Y2. F has the opposite, output decreasing by 2% for Y1, and increasing by 1% for Y2. Under flexible exchange rates, the domestic currency should _____:

appreciate by 6%

appreciate by 3%

depreciate by 6%

depreciate by 2%

In an OLG economy where each generation has 14 bananas when young, and 6 bananas when old.

Fed creates 4 units of money, given to generation 0 for free.

In period 1, unemployment rate is equal to __%.