Comparison to the open-economy multiplier in the text

Assignment Help Business Economics

Reference no: EM131236850

Suppose that autonomous consumption increases but that, unlike the situation in the simple Keynesian model of this chapter, some of this autonomous consumption increase is spent on imports (say an amount equal to MPM times the autonomous consumption increase) in the “first round” of the multiplier process. What would this mean for the size of the open-economy multiplier in comparison to the open-economy multiplier in the text?

Reference no: EM131236850

Questions Cloud

Example of good or service that is intangible : Give an example of a good or service that is “intangible” (not a physical commodity) and is NOT shareable. Explain briefly why it cannot be shared. Give an example of a good or service that is shared in the production of the good or service that you ..

In situation of fixed exchange rate : In a situation of a fixed exchange rate, explain why, in the monetary approach, an excess supply of money leads to a balance-of-payments deficit. Why is the deficit only temporary? How might advocates of the monetary approach explain a long-lasting d..

Implication for country exchange rate in monetary approach : Explain the implication for a country’s exchange rate in the monetary approach and in the portfolio balance approach of (a) an autonomous decline in the demand for money at each interest rate by the country’s citizens, and (b) a change in expectation..

Overshooting of the exchange rate in the dornbusch model : Could there be “overshooting” of the exchange rate in the Dornbusch model if goods markets adjusted as rapidly as asset markets? Why or why not? What would be the analog to the general phenomenon of “overshooting” in a situation of fixed exchange rat..

Comparison to the open-economy multiplier in the text : Suppose that autonomous consumption increases but that, unlike the situation in the simple Keynesian model of this chapter, some of this autonomous consumption increase is spent on imports (say an amount equal to MPM times the autonomous consumption ..

If a country has a current account deficit : If a country has a current account deficit, this is often referred to as a situation where the country is “spending beyond its means.” What does this phrase mean in terms of the simple Keynesian model? Does the existence of the current account defici..

Actually be impacted by minimum wage increase : Should the United States pass a minimum wage that assures all workers earn a wage above the poverty level? Defend your position using economic principles. The response to this question is not as straightforward as it might seem. Consider the poverty ..

The impact of autonomous increase in foreign demand : Explain, in the IS/LM/BP framework with fixed exchange rates, the impact of an autonomous increase in foreign demand for a country’s exports upon the country’s national income, money supply, and balance of payments. If there is no impact on a variabl..

Fiscal policy is most effective in a fixed-rate system : Fiscal policy is most effective in a fixed-rate system when capital is perfectly mobile because there is no domestic “crowding out.” Explain what is meant by the term “crowding out,” and then critically evaluate the previous statement using the IS/LM..

User Account

All Pages