ECON303 Tutorial 5 - Econ303: International Money and...

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Econ303: International Money and Finance Tutorial 5 A. Discussion question Read Kenen’s paper, “Fixed versus Floating Exchange Rates” Summarize the case for and against fixed exchange rates. The article is available at the link http://www.cato.org/pubs/journal/cj20n1/cj20n1 13.pdf B. Short answer questions 1. Using AA-DD model analyse how a decrease in government spending will affect the economy (output, exchange rate and the current account) in the short run and the long run when the decrease in government spending is temporary and when it is permanent. Do your answers differ for the fixed and flexible exchange rate regimes? 2. There is continuous pressure on China to revalue renminbi. How would Chinese economy be affected by this revaluation? 3. Assume that the economy initially operating at the full employment level of output faces a negative demand shock (a change in foreign tastes which leads foreigners to import less domestic goods). Analyse how domestic policy makers may react to this shock. C. MC questions:
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This note was uploaded on 05/26/2010 for the course ECON 1160 taught by Professor Byrke during the Spring '10 term at Macomb Community College.

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ECON303 Tutorial 5 - Econ303: International Money and...

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