This topic contains a solution. Click here to go to the answer

Author Question: Use the following table to illustrate the importance of macroeconomic policy coordination. Show ... (Read 76 times)

lracut11

  • Hero Member
  • *****
  • Posts: 536
Use the following table to illustrate the importance of macroeconomic policy coordination.
 
  Show that the two governments would have been happier if the two of them had adopted looser monetary policies, but given the policies that the other government did adopt, it is not in the interest of any individual government to change its course. Assume that each country wishes to get the biggest reduction in inflation rate at the lowest cost in terms of unemployment. This means that each country maximizes-/U, the inflation reduction per point of increased unemployment.

Question 2

When the exchange rate is
 
  A) flexible, purposeful stabilization is more difficult because monetary policy has no power at all to affect domestic output and employment.
  B) fixed, purposeful stabilization is less difficult because monetary policy has no power at all to affect domestic output and employment.
  C) fixed, purposeful stabilization is more difficult because monetary policy has no power at all to affect domestic output and employment.
  D) a crawling peg, rather than fixed, purposeful stabilization is more difficult because monetary policy has no power at all to affect domestic output and employment.
  E) fixed rather than crawling peg purposeful stabilization is more difficult because fiscal policy has no power at all to affect domestic output and employment.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Mholman93

  • Sr. Member
  • ****
  • Posts: 328
Answer to Question 1

One needs to translate the outcomes of the table above into policy payoffs. Assume that each country wishes to get the biggest reduction in inflation rate at the lowest cost in terms of unemployment. This means that each country maximizes -/U, the inflation reduction per point of increased unemployment. This leads to the following table. The outcome of this game is on the lower right hand side of the table, where the two countries use very restrictive monetary policies rather than cooperating and using the better somewhat restrictive policies for both of them.

Answer to Question 2

C




lracut11

  • Member
  • Posts: 536
Reply 2 on: Jun 30, 2018
Great answer, keep it coming :)


xthemafja

  • Member
  • Posts: 348
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

 

Did you know?

In 1885, the Lloyd Manufacturing Company of Albany, New York, promoted and sold "Cocaine Toothache Drops" at 15 cents per bottle! In 1914, the Harrison Narcotic Act brought the sale and distribution of this drug under federal control.

Did you know?

Approximately one in four people diagnosed with diabetes will develop foot problems. Of these, about one-third will require lower extremity amputation.

Did you know?

Walt Disney helped combat malaria by making an animated film in 1943 called The Winged Scourge. This short film starred the seven dwarfs and taught children that mosquitos transmit malaria, which is a very bad disease. It advocated the killing of mosquitos to stop the disease.

Did you know?

Fatal fungal infections may be able to resist newer antifungal drugs. Globally, fungal infections are often fatal due to the lack of access to multiple antifungals, which may be required to be utilized in combination. Single antifungals may not be enough to stop a fungal infection from causing the death of a patient.

Did you know?

Acetaminophen (Tylenol) in overdose can seriously damage the liver. It should never be taken by people who use alcohol heavily; it can result in severe liver damage and even a condition requiring a liver transplant.

For a complete list of videos, visit our video library