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

International monetary system during the post-world war, Q. How did the int...

Q. How did the international monetary system influence macroeconomic policy-making and performance during the post-World War II years during which exchange rates were fixed under t

Process of monetary unification, Q. "Given that labor remains relatively im...

Q. "Given that labor remains relatively immobile within Europe, the European Union's success in liberalizing its capital flows may have worked perversely to worsen the economic sta

Discuss studies based on the interest parity conditions, Q. Discuss ...

Q. Discuss studies based on the interest parity conditions. Answer: Generally the formula doesn't hold and isn't a good predictor of future devaluations. Even poorer it

Classical theory, What are disadvantages the classical theory of internatio...

What are disadvantages the classical theory of international trade

Long-term economic growth, Q. It is argued that import substitution is a m...

Q. It is argued that import substitution is a misguided trade policy if the intent is to show long-term economic growth. Illustrate the reasons underlying this argument. Answe

International finance, INTERNATIONAL FINANCE International finance is c...

INTERNATIONAL FINANCE International finance is concerned with the mobility of financial capital across the countries,  and  the  problems  and  opportunities  this  mobility  p

Explain cost of production in terms of world trade, Q. If scale economies ...

Q. If scale economies were not only external to firms, but were also external to individual sites. That is, the larger the worldwide industry (regardless of where plants or firms

Why governments sometimes chose to devalue their currencies, Q. What are th...

Q. What are the three main reasons why governments sometimes chose to devalue their currencies? Answer: 1. Permit the government to fight domestic unemployment despite the

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