MEDIUM
Earn 100

Due to the depreciation of foreign currency, the supply of foreign currency in the domestic economy will:

50% studentsanswered this correctly

Important Questions on Open Economy Macroeconomics

MEDIUM
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Discuss the role of speculative activities in the foreign exchange market. How do they influence currency values?
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Distinguish between the nominal exchange rate and the real exchange rate. If you were to decide whether to buy domestic goods or foreign goods, which rate would be more relevant? Explain.
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Why is the open economy autonomous expenditure multiplier smaller than the closed economy one?
MEDIUM
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
How does a country’s foreign exchange reserves impact its economic stability and international trade relations?
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
How is the exchange rate determined under a flexible exchange rate regime?
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Suppose it takes 1.25 yen to buy a rupee, and the price level in Japan is 3 and the price level in India is 1.2. Calculate the real exchange rate between India and Japan (the price of Japanese goods in terms of Indian goods).
MEDIUM
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
What does the paradox of thrift state?
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Suppose C = 40 + 0.8Y D, T = 50, I = 60, G = 40, X = 90, M = 50 + 0.05Y (a) Find equilibrium income. (b) Find the net export balance at equilibrium income (c) What happens to equilibrium income and the net export balance when the government purchases increase from 40 and 50?
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Explain the automatic mechanism by which BoP equilibrium was achieved under the gold standard.
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Discuss some of the exchange rate arrangements that countries have entered into to bring about stability in their external accounts.
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Are the concepts of demand for domestic goods and domestic demand for goods the same?
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Would the central bank need to intervene in a managed floating system? Explain why.
MEDIUM
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
What is the marginal propensity to import when M = 60 + 0.06Y? What is the relationship between the marginal propensity to import and the aggregate demand function?
MEDIUM
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Discuss the concept of trade balance. How does it affect the current account and the overall economy?
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Calculate the open economy multiplier with proportional taxes, T = tY , instead of lump-sum taxes as assumed in the text.
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
If inflation is higher in country A than in Country B, and the exchange rate between the two countries is fixed, what is likely to happen to the trade balance between the two countries?
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Suppose C = 100 + 0.75Y D, I = 500, G = 750, taxes are 20 per cent of income, X = 150, M = 100 + 0.2Y . Calculate equilibrium income, the budget deficit or surplus and the trade deficit or surplus.
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Suppose the exchange rate between the Rupee and the dollar was Rs. 30=1$ in the year 2010. Suppose the prices have doubled in India over 20 years while they have remained fixed in USA. What, according to the purchasing power parity theory will be the exchange rate between dollar and rupee in the year 2030.
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Suppose C = 40 + 0.8Y D, T = 50, I = 60, G = 40, X = 90, M = 50 + 0.05Y. If exports change to X = 100, find the change in equilibrium income and the net export balance.
HARD
Economics>Macroeconomics>Open Economy Macroeconomics>Foreign Exchange Market
Differentiate between devaluation and depreciation.