Economics help

What is the short-run effect on the exchange rate of an increase in domestic real GNP, given expectations about future exchange rates?

Imagine that the central bank of an economy with unemployment doubles its money supply. In the long run, full employment is restored and output returns to its full employment level. On the (admittedly unlikely) assumption that the interest rate before money supply increase equals the long-run interest rate, is the long-run increase in the price level more than proportional or less than proportional to the money supply change? What if (as is more likely) the interest rate was initially below its long-run level?

Take a shot. What do you think would happen to exchange rates.

Start with drawing your IS-LM curves applied to open international markets.

I've only been in this class for 4 weeks, so we're not that far along yet. I've run into a couple of problems on my homework that I just don't understand:

1. Suppose the price elasticity of demand is 3, and the price elasticity of supply is 1. What happens to the price if the demand goes down by 12%?

2. Suppose the price elasticity of demand is 3, and the price elasticity of supply is 1. If the government levies a sales tax, what percentage of taxes (%) does the consumer pay?

3. Suppose the price elasticity of demand is 3, and the price elasticity of supply is 1. If the government levies a sales tax, what percentage of taxes (%) does the producer pay?

Thank you in advance!

  1. 👍
  2. 👎
  3. 👁
  1. Effect of chnge in echange rate oon export and real gdp

    1. 👍
    2. 👎

Respond to this Question

First Name

Your Response

Similar Questions

  1. Microeconomics

    A perfectly competitive industry has a large number of potential entrants. Each firm has an identical cost structure such that long run average cost is minimized at an output of 10 units (qi=10 ). The minimum average cost is R5

  2. micro economics

    1) Assume that the gold-mining industry is competitive. a) Illustrate a long-run equilibrium using diagrams for the gold market and for the a representative gold mine. b) Suppose that an increase in jewellery demand induces a a

  3. economics

    This is going to be really long, but I want to see if my answers are correct. This is problem number 10.10 in my Intermediate Microeconomics book. A perfectly competitive painted necktie industry has a large number of potential

  4. economics

    The hand made snuffbox industry is composed of 100 identical firms, each having short-run total costs given by STC=0.5q^2+10q+5 and short-run marginal costs by SMC=q+10 where q is the output of snuffboxes per day. a. What is the

  1. macroeconomics

    1 The most important reason for the slope of the aggregate demand curve is that as the price level _______. 1) increases, interest rates decrease, and investment increases 2) decreases, interest rates decrease, and investment

  2. AP Macroeconomics

    Japan, the European Union, Canada, and Mexico have flexible exchange rates. Suppose Japan attracts an increased amount of investment from the European Union. Using a correctly labeled graph of the loanable funds market in Japan,

  3. economics

    With proportional income tax, a. The tax multiplier equals (MPC)(1-MPC) b. The tax multiplier equals –MPC/(1-MPC) c. The spending multiplier equals (MPC)/(1-MPC) d. The spending multiplier equals 1/[1-MPC(1-t)] e. The spending

  4. Macroeconomics

    Please check my answers; stuck on a few questions on my homework. 1. In the long run, an increase in the supply of bank loans is matched by a __________ in the price level and the quantity of real loans is __________. A. rise;

  1. eco

    Assume that American rice sells for $100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the nominal exchange rate is 80 yen per dollar. Suppose that rice is the only commodity in the world. What would happen to the

  2. economics

    I am completely stuck on these two questions. I have read my chapter, but I am still doubting that I got the answers correct. 1.A decrease in aggregate demand causes a decrease in ______ only in the short run, but causes a

  3. Macroeconomics

    Suppose the Fed wishes to use monetary policy to close an expansionary gap. a. Should the Fed increase or decrease the money supply? b. If the Fed uses open-market operations, should it buy or sell government securities? c.

  4. Economic Question

    Sorry, this is a little long, hope somebody could give me some help. Thanks in advance. Consider the exchange rate of the dollar for the euro. Suppose that the liquidity function L(i) is the same in both the United States and

You can view more similar questions or ask a new question.