Study the effect of an increase in income, International Economics

Assignment Help:

Q. Using a figure illustrate the simultaneous equilibrium of the foreign exchange and domestic money markets when the exchange rate is fixed at E0 and is expected to remain fixed at E0 in the future.  Assume both P and Y is constants.  Now, study the effect of an increase in income, Y.

Answer:  The L(R*, Y) will shift down as well as to the right, which will require an increase in M to M2. This will necessitate the domestic central bank to purchase foreign assets and thereby increase the money supply leaving E at E0. Note that R = R* at the new balance as before.

1229_study the effect of an increase in income.png


Related Discussions:- Study the effect of an increase in income

Documentary collection used in international trade, Question: Tire Co L...

Question: Tire Co Ltd, a Mauritian company, is engaged in the import and distribution of tyres from TZ Co Ltd established in Mozambique. Tire Co Ltd trades since 10 years under

#foreign trade, What is the role of foreign trade in an economic developmen...

What is the role of foreign trade in an economic development of a country

Effects of an increase in the money supply, Q. What will be the effects of ...

Q. What will be the effects of an increase in the money supply on the interest rate? Answer: An enhance in the money supply will origins the interest rate to decrease. This m

Free trade, what are the limitations of net barter terms of trade

what are the limitations of net barter terms of trade

Krone free to float against the non-euro currencies, Q. Illustrate why when...

Q. Illustrate why when Norway unilaterally fixes its exchange rate against the euro but leaves the krone free to float against the non-euro currencies, it is unable to keep at leas

NET BARTER TERMS OF TRADE OR COMMODITY TERMS OF TRADE, TERMS OF TRADE MEAN...

TERMS OF TRADE MEANING AND NET BARTER TERMS OF TRADE MEANING TABLE DIAGRAM

Law of demand, Explain the law of demand. Briefly discussed the exception t...

Explain the law of demand. Briefly discussed the exception to the law of demand

Treflers case of missing trade, Q. The Heckscher-Ohlin model is famous for ...

Q. The Heckscher-Ohlin model is famous for being elegant and mathematically sophisticated, yet failing to define reality. One manifestation of this fact is Trefler's Case of Missi

Partial equilibrium analysis, How can I graph partial equilibrium analysis ...

How can I graph partial equilibrium analysis for demand and supply of two countries who have a transport cost of $5?

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