Econ 98 Chiu Exchange Rates Worksheet Name SID Spring 2005 Date Assumptions are critical in macroeconomics Different assumptions change dramatically your answers Read the assumptions carefully Please use the following relationships and data to answer the questions If the question asks you to calculate then make sure you have a number as an answer C 40 75Yd I planned 100 G 100 T 1Y EX 100 IM 1Y 1 Assume a closed economy NX 0 Calculate the equilibrium output Y1 2 Sketch the Keynesian cross for this closed economy Label Y1 Page 1 of 7 Econ 98 Chiu Exchange Rates Worksheet Name SID Spring 2005 Date 3 What is the government spending multiplier for this closed economy Write the general equation and calculate the multiplier This is not in the textbook or lecture 4 Assume an open economy Calculate the new equilibrium output Y2 5 Sketch the Keynesian cross for this open economy in problem 2 Label Y2 Page 2 of 7 Econ 98 Chiu Exchange Rates Worksheet Name SID Spring 2005 Date 6 What happened to aggregate income when the economy became open Explain what happened with words 7 What is the government spending multiplier for this open economy Write the general equation and calculate the multiplier This is not in the textbook or lecture Page 3 of 7 Econ 98 Chiu Exchange Rates Worksheet Name SID Spring 2005 Date 8 What are the two factors that change equilibrium exchange rates 9 Assume flexible exchange rates Argentina is currently in a recession Suppose Argentina s central bank engages in expansionary monetary policy in an effort to bring Argentina out of its recession Will US imports from Argentina rise or fall Explain by describing the impact of Argentina s expansionary monetary policy on the exchange rate between dollars and pesos and the effect of this change in exchange rate on US imports from Argentina Inspired by Professor Train s Spring 1994 Final Exam Page 4 of 7 Econ 98 Chiu Exchange Rates Worksheet Name SID Spring 2005 Date 10 Assume flexible exchange rates Investors in Japan lose confidence in investing in Japan and shift their funds to the US Does the yen depreciate or appreciate against the dollar Briefly explain your answer Inspired by Professor Train s Spring 1995 Final Exam 11 Graphically show the effect of a contractionary fiscal policy on the exchange rate Inspired by Professor Train s 1995 Final Exam 12 Graphically show the effect of a contractionary monetary policy on the exchange rate Inspired by Professor Train s 1995 Final Exam Page 5 of 7 Econ 98 Chiu Exchange Rates Worksheet Name SID Spring 2005 Date 13 The European Central Bank buys European securities bonds How does this affect US exports to Europe Explain with words and with graphs Page 6 of 7 Econ 98 Chiu Exchange Rates Worksheet Name SID Spring 2005 Date 14 OPEC surprisingly raises oil prices against the United States by an enormous amount Suppose the oil price hikes disproportionately affect the United States than the rest of the world How does this affect US exports to Britain Explain Page 7 of 7
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