Qo@aoMBA QBECIcCcoRcOduAOBEO = % + - 25 drive.google.com/file/d/1TXhiq9U22sUqkVcqGJd5vXtWSA0WD17F/view Y = o Finish update : ol GDFP7Y Use the same income elasticities as i the previous question. 2. Price elasticities (a) In a hypothetical country (not the US) suppose the price elasticity of imports is 0.4 and the price elasticity of exports is 1.5. Assume, as we usually do, that prices are set in the currency of the producing country. Assume that imports and exports initially each make up 20 percent of GDP. Now suppose that the country's currency appreciates by 20 percent. What is the change in the trade balance as a percent of GDP, measured in the local currency? What is the change in imports and exports as measured in foreign exchange (i.e. the world currency)? Use the same assumptions as in the previous question, except instead assume that exports are initially only 5 percent of GDP. Now what is the change in the trade balance as a percent of GDP, measured in the local currency and in foreign exchange, in response to a 20 percent appreciation? Use the same assumptions as in the first question, but now assume that all prices are set in the world currency. Now what is the change in the trade balance as a percent of GDP, measured in the local currency and in foreign exchange, in response to a 20 percent appreciation? R D 5/12/2024 @ o @e oMz GGlo@ceoAoBEO = X0 + = X 25 drive.google.com/file/d/1TXhiq9U22sUqkVcqGJd5vXtWSA0WD17F/view Y = o Finish update : balance as a percent of GDP, measured in the local currency? What is the change in imports and exports as measured in foreign exchange (i.e. the world currency)? Use the same assumptions as in the previous question, except instead assume that exports are initially only 5 percent of GDP. Now what is the change in the trade balance as a percent of GDP, measured in the local currency and in foreign exchange, in response to a 20 percent appreciation? Use the same assumptions as in the first question, but now assume that all prices are set in the world currency. Now what is the change in the trade balance as a percent of GDP, measured in the local currency and in foreign exchange, in response to a 20 percent appreciation? (d) In what contexts would we be interested in the trade balance as measured in local currency, and in what contexts would be interested in the balance as measured in the world currency? 3. Trade and macroeconomic policy (a) Suppose a country with a high level of unemployment decides to boost demand using expansionary fiscal policy, and raises public spending. What effects does this have on its imports and exports? Is the effect on unemployment larger or L L1 0 R D 5/12/2024