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

Author Question: Suppose output is above the natural level of output. In a fixed exchange rate regime, explain the ... (Read 179 times)

serike

  • Hero Member
  • *****
  • Posts: 542
Suppose output is above the natural level of output. In a fixed exchange rate regime, explain the two ways the economy can return to the natural level of output.
 
  What will be an ideal response?

Question 2

In the model where it is assumed that the state of technology does not change, what parameters and/or variables cause changes in steady state output per worker?
 
  A) savings rate
  B) depreciation rate
  C) human capital per worker
  D) all of above
  E) none of above



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

mcomstock09

  • Sr. Member
  • ****
  • Posts: 377
Answer to Question 1

Revaluation. Policy makers could revalue the currency. This would cause a reduction in NX, and reduction in demand, and a reduction in Y. Graphically, the AD curve would shift to the left. Economy self-corrects. With Y above the natural level, the expected price level (or expected inflation) will rise causing W to rise. As W rises, P will rise. As P rises, a real appreciation occurs and NX falls. We would move along the AD curve.

Answer to Question 2

D




serike

  • Member
  • Posts: 542
Reply 2 on: Jun 30, 2018
Wow, this really help


JCABRERA33

  • Member
  • Posts: 344
Reply 3 on: Yesterday
Excellent

 

Did you know?

Blood is approximately twice as thick as water because of the cells and other components found in it.

Did you know?

People often find it difficult to accept the idea that bacteria can be beneficial and improve health. Lactic acid bacteria are good, and when eaten, these bacteria improve health and increase longevity. These bacteria included in foods such as yogurt.

Did you know?

Throughout history, plants containing cardiac steroids have been used as heart drugs and as poisons (e.g., in arrows used in combat), emetics, and diuretics.

Did you know?

The B-complex vitamins and vitamin C are not stored in the body and must be replaced each day.

Did you know?

During pregnancy, a woman is more likely to experience bleeding gums and nosebleeds caused by hormonal changes that increase blood flow to the mouth and nose.

For a complete list of videos, visit our video library