ProblemSet3 - more expensive. e. Foreigners find that its...

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Department of Economics Fall 2011 University of California, Berkeley Econ 182 1 Problem Set 3 Due on Thursday, September 22, in lecture. Please, write your full name , GSI , and section number on your problem set. Problem 1 (multiple choice) When a country's currency depreciates: a. Foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are more expensive. b. Foreigners find that its exports are more expensive, and domestic residents find that imports from abroad are cheaper. c. Foreigners find that its exports are cheaper; however, domestic residents are not affected. d. Foreigners are not affected, but domestic residents find that imports from abroad are
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Unformatted text preview: more expensive. e. Foreigners find that its exports are cheaper and domestic residents find that imports from abroad are more expensive. Explain your answer. Problem 2 Money Markets: Suppose that the Fed sets the money supply and that money demand is given by M d =P = L(R; Y) as in class. a. What is the condition for money market equilibrium? Illustrate graphically. b. Illustrate the effect of an exogenous decrease in real income on the equilibrium interest rate (assuming prices are fixed). c. Suppose now that when output decreases, price also decreases. What happens to the interest rate now? Problem 3 Krugman, Obstfeld and Melitz Chapter 14 problem 9....
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This note was uploaded on 10/17/2011 for the course ECON 182 taught by Professor Kasa during the Spring '08 term at University of California, Berkeley.

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