This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: How is the impact of expansionary monetary policy different in an open economy than in a closed ... (Read 142 times)

melina_rosy

  • Hero Member
  • *****
  • Posts: 531
on: Jun 29, 2018
How is the impact of expansionary monetary policy different in an open economy than in a closed economy?
 
  What will be an ideal response?

Question 2

Assume a closed economy with fixed taxes and the marginal propensity to consume is equal to 0.9. What is the government spending multiplier?
 
  A) 10 B) 9 C) 5 D) 1


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

pikon

  • Sr. Member
  • ****
  • Posts: 361
Reply #1 on: Jun 29, 2018
Answer to Question 1

In an open economy, the lower interest rate resulting from expansionary monetary policy will affect not only consumption and domestic investment, but it will also affect net exports and net capital flows. Lower interest rates will decrease capital inflows and increase capital outflows, resulting in a decrease in the exchange rate (when stated in terms of foreign currency per domestic currency) which will increase net exports. The result is that monetary policy has a stronger effect in an open economy than in a closed economy.

Answer to Question 2

A


melina_rosy

  • Member
  • Posts: 531
Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

tkempin

  • Member
  • Posts: 332
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

A seasonal flu vaccine is the best way to reduce the chances you will get seasonal influenza and spread it to others.

Did you know?

To combat osteoporosis, changes in lifestyle and diet are recommended. At-risk patients should include 1,200 to 1,500 mg of calcium daily either via dietary means or with supplements.

Did you know?

There are actually 60 minerals, 16 vitamins, 12 essential amino acids, and three essential fatty acids that your body needs every day.

Did you know?

Vital signs (blood pressure, temperature, pulse rate, respiration rate) should be taken before any drug administration. Patients should be informed not to use tobacco or caffeine at least 30 minutes before their appointment.

Did you know?

Once thought to have neurofibromatosis, Joseph Merrick (also known as "the elephant man") is now, in retrospect, thought by clinical experts to have had Proteus syndrome. This endocrine disease causes continued and abnormal growth of the bones, muscles, skin, and so on and can become completely debilitating with severe deformities occurring anywhere on the body.

Open-top chambers, such as the one pictured above in a polar desert on Ellesmere Island, are commonl Open-top chambers, such as the one pictured above in a polar desert on Ellesmere Island, are commonl
APPLYING A STERILE GOWN AND PERFORMING CLOSED GLOVING 3 APPLYING A STERILE GOWN AND PERFORMING CLOSED GLOVING 3
In the Tai Forest a female chimp demonstrates a skill once thought to be unique to humans. Here she In the Tai Forest a female chimp demonstrates a skill once thought to be unique to humans. Here she
To cleanse an open wound, begin close to the wound and work outward in full or half circles. To cleanse an open wound, begin close to the wound and work outward in full or half circles.
The answer to “What is the proper role of children in an economy?” varies by social class, ... The answer to “What is the proper role of children in an economy?” varies by social class, ...
The Impact of Cross-Ethnic Friendships on Minority Students’ Well-Being The Impact of Cross-Ethnic Friendships on Minority Students’ Well-Being
Video: Covalent bonds - role in the body

For a complete list of videos, visit our video library