ps09 - University of Toronto Macroeconomics, Theory and...

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Unformatted text preview: University of Toronto Macroeconomics, Theory and policy Masoud Anjomshoa Economics Department Assignment #9 1- Consider an economy with fixed exchange rate policy, suppose government devalues the exchange rate unexpectedly. For each of following cases, by drawing IS/LM, interest parity, and trade balance curves show the changes in output, interest rate, trade balance, exchange rate, and investment. a)- If investors believe that there will not be any further devaluation. b)- After devaluation, investors still believe that another devaluation is likely to come soon. ---------------------------------------------------------------------------------------------------------------------------------- 2- Consider a group of open economies, where among them there is a country with large economy as a leader whose exchange rate is flexible. While the other countries are relatively smaller, and have pegged their exchange rate to the leader country. For each of following cases, by drawing IS/LM, interest parity, and trade...
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This note was uploaded on 04/10/2010 for the course ECO ECO202 taught by Professor Masoudanjamshoa during the Spring '10 term at University of Toronto.

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