601 UNIT 7 Problem Set PDF

Title	601 UNIT 7 Problem Set
Author	chance russell
Course	Macroeconomics
Institution	American University (USA)
Pages	2
File Size	41.5 KB
File Type	PDF
Total Downloads	91
Total Views	156

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PROBLEM SET UNIT 7 (10 points) Chapter 20 1. Compare the short-run effectiveness of fiscal contraction under (a) flexible exchange rates and (b) fixed exchange rates. Use the open economy IS*-LM along with the uncovered interest parity condition. Explain the detailed reasoning in each case. Finally, summarize the changes in each case for: Domestic interest rates Nominal exchange rates Real GDP

2. Compare the short-run effectiveness of monetary expansion under (a) flexible exchange rates and (b) fixed exchange rates. Use IS*-LM along with the uncovered interest parity condition. Explain the detailed reasoning in each case. Finally, summarize the changes in each case for: Domestic interest rates Nominal exchange rates Real GDP

TRUE/FALSE/EXPLAIN (Use 2-3 sentences) 3. Since the countries of the European Union have high labor market mobility, the EU is a good candidate for an optimal currency area (OCA).

4. A currency board is the best way to operate a fixed exchange rate system....