1. Assuming that the economy is in equilibrium, find the value of the interest rate. 2. Going from the equilibrium found in Question (1), assuming fixed nominal exchange rates, what is the effect on domestic output if the foreign interest rate increases by 0.05? (a) What is the size of the nominal money supply in the new short run equilibrium? 3. Going from the equilibrium found in Question (1), assuming flexible exchange rates, what is the effect on domestic output if the foreign interest rate increases by 0.05?
1. Assuming that the economy is in equilibrium, find the value of the interest rate. 2. Going from the equilibrium found in Question (1), assuming fixed nominal exchange rates, what is the effect on domestic output if the foreign interest rate increases by 0.05? (a) What is the size of the nominal money supply in the new short run equilibrium? 3. Going from the equilibrium found in Question (1), assuming flexible exchange rates, what is the effect on domestic output if the foreign interest rate increases by 0.05?
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Open-economy Macroeconomics: Basic Concepts
Section: Chapter Questions
Problem 2PA
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