Exam 17: Output and the Exchange Rate in the Short Run

Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 100 euros and the representative U.S. basket costs $125, and the dollar/euro exchange rate is $0.75 per euro, then the price of the European basket in terms of U.S. basket is:

One implication of an empirical investigation of the Marshall-Lerner condition is that, in the ________, a real ________ in a nation's currency is likely to ________ the country's current account balance.

If consumers experience an increase in lifetime income, current spending will ________, current saving will ________, and future spending will ________.

How is the AA schedule derived?

A permanent increase in the domestic money supply

Which of the following would cause the current account to decrease?

In the short run, a temporary increase in money supply

What is an accurate implication resulting from an increase in income?

Which of the following is an example of an "unconventional monetary policy" by a central bank?

Imagine that the economy is at a point that is above both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE?

An intertemporal budget constraint

In the short run, a permanent increase in the domestic money supply

Imagine that the economy is at a point on the DD-AA schedule that is above both AA and DD and where both the output and asset markets are out of equilibrium. Explain what will happen next?

The domestic currency price of a representative domestic expenditure basket is

The aggregate demand for home input can be written as a function of: I. Real exchange rate. II) Government spending. III) Disposable income.

Explain the difference between the following two expressions: Y = C(Y^d) + I + G + CA(EP /P, Y^d) and Y = C + I +G + CA

Using the DD model, explain what happens to output when Government demands increase. Use a figure to explain when it is taking place.

Show the effects of a permanent increase in the money supply.

Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 150 euros and the representative U.S. basket costs $200, and the dollar/euro exchange rate is $1.20 per euro, then the price of the European basket in terms of U.S. basket is:

Explain what are the factors that shift the AA Schedule?