Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

help please section 1 Macroland is recognized as a high-income economy by the World Bank. The country of Macroland is now in recession. a) using

help please

section 1

Macroland is recognized as a high-income economy by the World Bank. The country of Macroland is now in recession.

a) using a correctly labeled graph of the long run aggregate supply, short run aggregate supply, and aggregate demand curves and show each of the following:

i. Current price level, labelled PL1

II. Current output, labelled Y1

b) Assume the Braveland, a major trading partner of Macroland, enters into a recession.

i. Explain the effect on Macroland exports to Braveland.

ii. On your graph in part (a) above, show the effect of the change identified in part (b) (i)above on real output in Macroland.

iii. How would this change in real output in Macroland affect unemployment in Macroland?

c) Assume the recession in Braveland, cause a decrease in the demand for Macroland dollars in the foreign exchange market. Braveland's currency is the euro.

i. Explain whether the euro will appreciate, depreciate, or remain unchanged against the dollar.

ii. Draw a correctly labeled graph of the foreign exchange market for dollars and show the effect of the decrease in demand for dollars on the exchange rate for dollars.

d) Macroland implements a combination of expansionary fiscal and monetary policies. what will be the effect of these policies on each of the following?

i. Aggregate demand in Macroland

ii. The price level in Macroland

iii. Explain the effects of expansionary fiscal policies on interest rates in Macroland.

iv. Explain the effects of expansionary monetary policies on interest rates in Macroland.

section 2

Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world.

a) Explain how this increase in interest rates will affect each of the following for the country X.

I. Investment

ii. The international value of its currency

iii. Exports

b. using a correctly labelled aggregate demand and aggregate supply diagram show how the change in investment you identified in part (a) will affect each of the following in the short run.

i. Output

ii. The price level

c. Identify one fiscal policy action that could counter the effect identified in part (b). explain how this policy will affect each of the following.

i. output

ii. The price level

iii. Nominal interest rates

d. i. Identify one monetary policy that could counter the effects identified in part (b).

ii. Using a correctly labelled money market graph, show how this policy will affect nominal interest rates.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Sociology Of Economic Innovation

Authors: Francesco Ramella

1st Edition

1317621344, 9781317621348

More Books

Students also viewed these Economics questions

Question

Describe the factors influencing of performance appraisal.

Answered: 1 week ago

Question

Personal role: This consists of service to family and friends.

Answered: 1 week ago

Question

The role of life: It consists of your own service to yourself.

Answered: 1 week ago