problem set 12

problem set 12 - the home currency if there is a decrease...

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ECON 205: PRINCIPLES OF MACROECONOMICS SPRING 2010 MARK MOORE PROBLEM SET 12 1. Baumol and Blinder, ch. 17, Test Yourself #1. 2. Baumol and Blinder, ch. 17, Test Yourself, #2. 3. Baumol and Blinder, ch. 17, Discussion Question # 5. 4. What is the nominal exchange rate? What is the real exchange rate? 5. How does a nominal depreciation of the home currency affect the trade balance? 6. Suppose one country has persistently higher inflation than the rest of the world. Other things equal, what will happen to the value of this country's currency over time? 7. a. Show in a diagram how the nominal exchange rate is determined. b. Assuming no change in the home interest rate, what will happen to the value of the home currency if there is an increase in the foreign interest rate i*? c. Assuming no change in the home interest rate, what will happen to the value of
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Unformatted text preview: the home currency if there is a decrease in the expected future exchange rate? 8. Evaluate the effects of an increase in G in an economy with a flexible exchange rate. 9. Evaluate the effects of a monetary expansion in an economy with a flexible exchange rate. 10. Evaluate the effects of an increase in foreign output (Y*) on an economy with a flexible exchange rate. 11. Evaluate the effects of a monetary expansion (i.e., the central bank buys domestic bonds) in an economy with a fixed exchange rate. 12. Evaluate the effects of an increase in G in an economy with a fixed exchange rate. 13. How does a devaluation affect output? 14. How does an increase in i* or a fall in the expected future exchange rate affect an economy with a fixed exchange rate?...
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