Explain how the aa schedule is derived, International Economics

Assignment Help:

Q. Explain how the AA schedule is derived.

Answer: For a fixed real money supply an enhancement in output leads to an increase in the domestic interest rate. In the foreign exchange market an enhancement in the domestic interest rate leads to a lower nominal exchange rate therefore appreciating the currency. Therefore the relationship among nominal exchange rate and output is negative this leads to a negative slope of the AA schedule which has the ostensible exchange rate and output on its axes.


Related Discussions:- Explain how the aa schedule is derived

How and why did europe set up its single currency, Q. How and why d...

Q. How and why did Europe set up its single currency? Answer: The why part of the question is associated to large fluctuations in the exchange rates between the Europe

How a central bank fixes the exchange rate, Q. How A Central Bank Fixes the...

Q. How A Central Bank Fixes the Exchange Rate? Answer: The Central bank should always be willing to trade currencies at the fixed exchange rate with the private actors in the f

Situations when a tariff and a quota are not equivalent, Q. Economic theor...

Q. Economic theory in general and trade theory in particular are replete with equivalencies. For illustration, it is argued that for any specific tariff one can search an equival

Why do we observe the leontief paradox, Q. Why do we observe the Leontief ...

Q. Why do we observe the Leontief paradox? Answer: There are several possible answers that they may be categorized into three groups. One would argue that the theory or model

Inflation can be imported from abroad unless exchange rates, Q. Use the II ...

Q. Use the II - XX framework in order to show graphically how inflation can be imported from abroad unless exchange rates are adjusted. Answer: Suppose that the home economy is

Regain internal and external balance after first oil shock, Q. How did coun...

Q. How did countries use their policy tools to regain internal and external balance after the first oil shock of 1973? Answer: Seeing that the recession deepened over 1974 an

Explain how the aa schedule is derived, Q. Explain how the AA schedule is d...

Q. Explain how the AA schedule is derived. Answer: For a fixed real money supply an enhancement in output leads to an increase in the domestic interest rate. In the foreign e

International Economics, Brifly explaine the alternative explanation to the...

Brifly explaine the alternative explanation to the theory of international trade

Explain the fundamental equation of the monetary approach, Present and expl...

Present and explain the Fundamental Equation of the Monetary Approach. Answer:  Suppose E $ /E = P US /P E and that domestic price levels depend on domestic money demands and

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd