Result increases infrastructure spending

Assignment Help Business Economics

Reference no: EM131001932

Assume the U.S. is a SMALL OPEN economy and the European Union is a LARGE OPEN economy. In addition, suppose the EU cuts tax rates and increases infrastructure spending. State and explain what the effects are on:

a. The levels of investment in the U.S. (please provide a graph using the LF market in the US)

b. U.S. net capital outflow

c. U.S. trade balance

d. U.S. real exchange rate (please provide a graph for Net Exports in the US)

Assume the U.S. is a small open economy and has balanced trade. Suppose Congress is worried about the U.S. economy entering another recession and as a result increases infrastructure spending.

a. Using the LF model, illustrate and describe the effect of this policy on the U.S. trade balance.

b. Using the net exports model, illustrate and describe the effect of this policy on the U.S. real exchange rate.

Reference no: EM131001932

Questions Cloud

What is the income elasticity of gasoline : Suppose that when income increases by 10%, the quantity demanded of gasoline increases by 3%. What is the income elasticity of gasoline? Based on your answer, is gasoline a normal or inferior good? Is it a necessity or a luxury?

Demand for ethanol has increased the price of sugarcane : Suppose that rising demand for ethanol has increased the price of sugarcane, and that land devoted to growing sugarcane is also commonly used to grow rice. What impact would an increase in the price of sugarcane have on the supply of rice? Suppose th..

Using supply and demand curve diagrams : Please provide answers to the following using supply and demand curve diagrams. What is the effect of a decrease in the price of rubber on the new car market? What effect might cause the price of milk to fall and the quantity to fall also?

Design and layout of the home page : Visit the websites of five major corporations or organizations. design and layout of the home page, ability to easily navigate the site and find information of interest to you

Result increases infrastructure spending : Assume the U.S. is a SMALL OPEN economy and the European Union is a LARGE OPEN economy. In addition, suppose the EU cuts tax rates and increases infrastructure spending. Assume the U.S. is a small open economy and has balanced trade. Suppose Congress..

Write down thieles differential equation for the reserve : Write down Thiele's differential equation for the reserve, and verify that your answer to (a) satisfies this equation.

Demand function for original superman comic books : Justine collects vintage comic books. When prices for all other goods are fixed at current levels, her demand function for original superman comic books is S = .02m – 2p. In this equation, m is her income, p is the price of superman comics and S is t..

What is the equation for budget constraint : Julia’s grade in her history class depends on a term paper and a final exam. Her grade will be the minimum of the two scores. She has 1,200 minutes to devote to her history class, and she wants to maximize her grade. Putting the final exam score on t..

How much money would be accumulated : How much money would be accumulated in 10 years for a deposit of $10,000 made at the end-of-year zero if the account earned interest at 6% per year for the first three years, 9% per year for the next four years, and 7% per year for the last three yea..

User Account

All Pages