Question

You are the economic advisor to Sir Bufton Tufton, the Prime Minister of Perfidia. The Bank of Perfidia is pegging the of the local currency, the Perfidian albion. The albion is pegged to the wotan, which is

Question

Home’s currency is the peso and trades at 1 peso per dollar. Home has external assets of $200 billion, all of which are denominated in dollars. It has external liabilities of $400 billion, 75% of which are denominated in dollars.
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Question

Use the symmetry-integration diagram as in Figure 8-4 (19-4) to explore the evolution of international monetary regimes from 1870 to 1939—that is, during the rise and fall of the gold standard. See the following diagram.
a. From 1870 to

Question

Assume that initially the IS curve is given by
IS1: Y = 12 – 1.5T – 30i + 2G
and that the price level P is 1, and the LM curve is given by
LM1: M =

Question

This question explores IS and FX equilibria in a numerical example.
a. The consumption function is C = 1.5 + 0.75(Y – T). What is the marginal propensity to consume MPC? What is the marginal propensity to save MPS?
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Question

Repeat the previous question, assuming the central bank responds in order to maintain a fixed exchange rate. In which case or cases will the government response be the same as in the previous question?
See the following diagrams. Point

Question

For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock. For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C,

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This question continues from the previous problem, focusing on how risk premiums explain the gaps in living standards across countries.
a. Investors worry about the rule of law in Turkey and also about the potential for hyperinflation and other

Question

Using production function and MPK diagrams, answer the following questions. For simplicity, assume there are two countries: a poor country (with low living standards) and a rich country (with high living standards).
a. Assuming that poor and rich countries

Question

Continuing from the previous question, we now consider Argentina’s external wealth position.
a. What is Argentina’s external wealth W in year 0 and later? Suppose Argentina has a one-year debt (i.e., not a perpetual loan) that must be rolled