After bad experiences with a flexible exchange rate

Assignment Help Business Economics

Reference no: EM13837319

a) After bad experiences with a flexible exchange rate, the small open economy of Rivendell decides to fix it exchange rate. Suppose the economy of Rivendell has reached the long run equilibrium (i.e. full employment).Use the Mundell-Fleming model to explain what would happen to aggregate income, the real exchange rate, the nominal exchange rate, the real interest rate in this small open economy with a fixed exchange rate if the government implements a tariff on imported goods.

b) Is trade policy more effective under a flexible exchange rate than under a fixed exchange rate? Explaining your reasoning.

Reference no: EM13837319

Questions Cloud

In small open economy with fixed exchange rate : In a small open economy with a FIXED EXCHANGE RATE, the central bank buys foreign currency in the foreign exchange market to prevent a depreciation of the nominal exchange rate.

Direct labor hours : Douglas Davis, controller for Marston, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 2015: Level of Activity Driver: Direct Labor Hours

Small open economy-starting from position of balanced trade : In a small open economy, starting from a position of balanced trade, if the government increases domestic government purchases, this produces a tendency toward a trade deficit and negative net capital outflow.

The basic facts about trojan café. : Trojan Café is a small on-campus coffee shop that operates from 7am until 10am during the morning rush, with no customers arriving after 10am. The store is thinking of streamlining its operation, and it is interested in understanding how this will im..

After bad experiences with a flexible exchange rate : After bad experiences with a flexible exchange rate, the small open economy of Rivendell decides to fix it exchange rate. Suppose the economy of Rivendell has reached the long run equilibrium. Is trade policy more effective under a flexible exchange ..

Writing intensive labor market economics class : Why is your topic important? What is(are) the policy(s) that you are going to discuss in your paper? Identify the relevant literature. This is for a writing intensive labor market economics class. I need about a page and a half meeting the above crit..

Worked extensively in japanese manufacturing : "Class: As you already know, Total Quality Management was developed by a management consultant named William Deming, who worked extensively in Japanese manufacturing.

What is the exposure of the surety : A contract for a project has a value of $5,000,000. A performance bond of 25% has been issued for the project. The contractor performs only 50% of the work. The consulting engineer has certified to the owner that 80% has been completed. The surety th..

The shopping channel-management of large global network : The Shopping Channel (TSC) has contracted out the management of its large global network of thousands of computers to Morhel Communications (MC), a network management specialist.

User Account

All Pages