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 75 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
:D TYSM


debra928

  • Member
  • Posts: 342
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

Did you know?

Earwax has antimicrobial properties that reduce the viability of bacteria and fungus in the human ear.

Did you know?

Signs of depression include feeling sad most of the time for 2 weeks or longer; loss of interest in things normally enjoyed; lack of energy; sleep and appetite disturbances; weight changes; feelings of hopelessness, helplessness, or worthlessness; an inability to make decisions; and thoughts of death and suicide.

Did you know?

According to the National Institute of Environmental Health Sciences, lung disease is the third leading killer in the United States, responsible for one in seven deaths. It is the leading cause of death among infants under the age of one year.

Did you know?

Cutaneous mucormycosis is a rare fungal infection that has been fatal in at least 29% of cases, and in as many as 83% of cases, depending on the patient's health prior to infection. It has occurred often after natural disasters such as tornados, and early treatment is essential.

Did you know?

In most climates, 8 to 10 glasses of water per day is recommended for adults. The best indicator for adequate fluid intake is frequent, clear urination.

For a complete list of videos, visit our video library