Question
In August 2020, Haiti and the Dominican Republic, two Caribbean economies, were hit by hurricane Laura, experiencing a negative aggregate supply shock as a result.
In August 2020, Haiti and the Dominican Republic, two Caribbean economies, were hit by hurricane Laura, experiencing a negative aggregate supply shock as a result. (a) Haitians assume this is a one-time shock, so it is expected to have no wealth effects. Use the labor market and the production function to describe the effects on employment, output, and the real wage. (b) In the Dominican Republic the shock is believed to be permanent, so there is a negative wealth effect. Redo (a). What are the differences?
Faced with high levels of government debt, European Union economies have been reducing government expenditure and/or raising taxes. What are the effects of these "austerity policies" on EU national saving, S? For each of the following three cases, derive the expected effects on EU and US interest rates, saving, investment, and net exports: (a) EU is a closed economy; (b) EU is a small open economy; (c) the world consists of two large economies: the EU and the US.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started