Government fiscal policy and international trade

Assignment Help Business Economics

Reference no: EM13994486

Government fiscal policy and international trade seem to be linked. Let’s investigate their relationship.

A. Say a government is currently running a budget deficit and decides to cut taxes, increase spending, or both. Explain how this will affect interest rates in the country.

B. Given the change in interest rates from part A, what will happen to the value of this country's currency? Explain why.

C. Given the change in the value of the country's currency from part B, how will the price of the country's goods relative to other countries' goods change? What effect will this have on its current account?

D. What effect will all this have on the country's capital account, and how will this work to keep the balance of payments equal to zero?

Reference no: EM13994486

Questions Cloud

Equal protection clause : Equal Protection Clause The state of Alabama enacted a statute that imposed a tax on premiums earned by insurance companies. The statute imposed a 1 percent tax on domestic insurance companies (i.e., insurance companies that were incorporated in Alab..

Billing and reimbursement-marketing and reimbursement : Analyze the collection of data by patient access personnel and its importance to the billing and collection process. Be sure to address the importance of exceptional customer service. Analyze the strategies used to negotiate new managed care contract..

Clean air act-establishes national air pollution standards : The Clean Air Act, a federal statute, establishes national air pollution standards for fleet vehicles such as buses, taxicabs, and trucks. The South Coast Air Quality Management District (South Coast) is a political entity of the state of California...

Power parity and law of one price are two related concepts : Purchasing power parity and the law of one price are two related concepts. Explain what is meant by the law of one price. Also explain why a person or nation could profit if this law does not hold. Offer three reasons why the law of one price might n..

Government fiscal policy and international trade : Government fiscal policy and international trade seem to be linked. Let’s investigate their relationship. Say a government is currently running a budget deficit and decides to cut taxes, increase spending, or both. Explain how this will affect intere..

Calculate the opportunity cost of producing each good : Using a certain quantity of resources, workers in the fictitious country of Iguania can produce 4 bottles of penicillin or 12 loaves of bread. Using the same resources, workers in another fictitious country, Chamelia, can produce 6 bottles of penicil..

Dansby-willig performance index-horizontal merger : Dansby-Willig Performance Index, horizontal merger, Herfindahl-Hirschman Index (HHI), Perfect competition, brand myopic, diseconomies of scale.

List six main objectives of public relations efforts : Write a four- to five-page paper that answers the following questions. List six main objectives of public relations efforts. Using a company that sells a product you purchase or provides a service you use, explain how it could try to achieve each of ..

Use a proactive or reactive strategy : Consider the BP oil spill that spawned a heavy public relations campaign after beaches were closed and wildlife was affected. write a two- to three-page paper that answers the following questions: Did BP use a proactive or reactive strategy? Explain ..

User Account

All Pages