homework4summer2006

homework4summer2006 - Economics 302 4 Week Summer Session...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 302 4 Week Summer Session 2006 Homework #4 Due Monday, June 19, 2006 6/13/06 Homework will be graded for content as well as neatness. Sloppy or illegible work will not receive full credit. 1. Use the Mundell-Fleming Model of a small open economy under a floating exchange rate regime to answer this question. Suppose the initial equilibrium for this economy in shown in the graph below: a. (1 point) Suppose there is an increase in taxes in this economy. Redraw the above graph showing the effects of this policy change on the IS* curve, the LM* curve, the level of output and the exchange rate. b. (1 point) Given your answer in part (a), what happens to the trade balance? Explain your answer. c. Suppose instead of a change in fiscal policy the central bank of this economy increases the money supply. i. (1 point) What is the effect of this change in the money supply on real balances? ii. (1 point) What is the effect of this change in the money supply on the LM* curve, the exchange rate, and the level of aggregate
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 08/08/2008 for the course ECON 302 taught by Professor Gold during the Spring '07 term at Wisconsin.

Page1 / 2

homework4summer2006 - Economics 302 4 Week Summer Session...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online