Explain predicted impact of foreign expansionary policy

Assignment Help International Economics

Reference no: EM13209971

a. Suppose that governments around the world begin to engage in expansionary fiscal policy (run large budget deficits) in order to stimulate economic activity in their countries. Use the long-run model of a small open economy to illustrate graphically the impact of this expansionary fiscal policy by foreigners on the U.S. exchange rate and the trade balance. Assume that the country starts from a position of trade balance, i.e., exports equal imports. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; and v. the new long-run equilibrium values.

b. Based on your graphical analysis, explain the predicted impact of the foreign expansionary fiscal policy on the U.S. exchange rate and the U.S. trade balance.

Reference no: EM13209971

Questions Cloud

Explain a simple distillation or a fractional distillation : Specify whether a simple distillation or a fractional distillation would be more suitable for each of the following purifications, and briefly justify your choice.

Theoretical approaches of interpersonal communication : Analyze the main theoretical approaches of interpersonal communication and emotional intelligence and apply the theoretical framework in their personal and professional lives.

What would be labor supply of female high school graduates : Within this group, the average weekly wage of the high-school graduates is 2/3 the amount of college graduates. Assume that wage elasticity and all other individual characteristics are the same across the education groups.

Explain mercury is at temperatures below its freezing point : When mercury is at temperatures below its freezing point it has a simple cubic unit cell. How many atoms of Hg are present in each unit cell?

Explain predicted impact of foreign expansionary policy : Suppose that governments around the world begin to engage in expansionary fiscal policy (run large budget deficits) in order to stimulate economic activity in their countries. Use the long-run model of a small open economy

Which layers in the tcp/ip protocol suite need to be changed : In an internet, we change the LAN (Local Area Network) technology to a new one? Which layers in the TCP/IP protocol suite need to be changed?

Find out the numbers of electron pairs : Determine the numbers of electron pairs (both bonding pairs and lone pairs) on the iodine atom in the following.

What would be the optimal price of the book : By engaging in the business, the students realized that they would have to give up their summer jobs. Each student made an average of $4,000 per summer. However, they believed they could keep expenses down by doing much of the research for the boo..

What are the allegory of cave and the divine line : What are the "Allegory of Cave" and "The Divine Line" and What are Plato's theories of knowledge, purpose of education and obligations of philosophers

User Account

All Pages