Question
1. Show, by using a graph, and briefly explain the international parity conditions in equilibrium. 2. Describe the relative purchasing power parity condition and comment it in terms of short-run and long-run.

Subject
business-economics

Question
Suppose the consumption function is C = $500 billion + 0.9Y and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially (before multiplier effects) with (a) A $50 billion increase in government purchases?

Question
Suppose consumption and investment are described by the following: C = 150 + 0.75DI I = 300 + 0.2Y – 50r Here DI is disposable income; Y is GDP, and r, the interest rate, is measured

Question
Explain why X – IM = (S – I) – (G – T). Now multiply both sides of this equation by –1 to get IM – X = (I – S) + (G – T) And remember that the trade deficit,

Question
Use an aggregate supply-demand diagram to analyze the effects of a currency appreciation.

Subject
business-economics

Question
In 2007 and 2008, the international value of the dollar fell. This development was viewed with alarm in Japan. Why?

Subject
business-economics

Question
Given what you now know, do you think it was a good idea for the United States to adopt a policy mix of tight money and large government budget deficits in the early 1980s? Why or why not? What were the benefits

Question
Explain why American fiscal policy is less powerful and American monetary policy is more powerful than indicated in the closed-economy model described earlier in this book.

Subject
business-economics

Question
Explain why a currency depreciation leads to an improvement in a country’s trade balance.

Subject
business-economics

Question
If inflation is lower in Germany than in Spain (as it is), and the between the two countries is fixed (as it is, because of the monetary union), what is likely to happen to the balance of trade between