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

Author Question: For this question, suppose the domestic interest rate is 4 and that the foreign interest rate is 7. ... (Read 130 times)

cmoore54

  • Hero Member
  • *****
  • Posts: 568
For this question, suppose the domestic interest rate is 4 and that the foreign interest rate is 7. And finally, assume that the domestic currency is expected to depreciate by 3 during the coming year. Given this information, we know that
 
  A) individuals will only hold domestic bonds.
  B) individuals will only hold foreign bonds.
  C) individuals will be indifferent about holding domestic or foreign bonds.
  D) the interest parity condition holds.

Question 2

Graphically illustrate (using the WS and PS relations) and explain the effects of an increase in the minimum wage on the equilibrium real wage, the natural rate of unemployment, the natural level of employment, and the natural level of output.
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

triiciiaa

  • Sr. Member
  • ****
  • Posts: 349
Answer to Question 1

B

Answer to Question 2

An increase in the minimum wage will cause the nominal wage based on wage setting behavior to increase; this is represented as an upward shift in the WS relation. As the nominal wage increases, firms will respond by increasing the price level so we will observe no change in the equilibrium real wage. We will observe an increase in the natural rate of unemployment and a reduction in both the natural level of employment and output.




cmoore54

  • Member
  • Posts: 568
Reply 2 on: Jun 30, 2018
Gracias!


mochi09

  • Member
  • Posts: 335
Reply 3 on: Yesterday
:D TYSM

 

Did you know?

Warfarin was developed as a consequence of the study of a strange bleeding disorder that suddenly occurred in cattle on the northern prairies of the United States in the early 1900s.

Did you know?

The ratio of hydrogen atoms to oxygen in water (H2O) is 2:1.

Did you know?

There are more nerve cells in one human brain than there are stars in the Milky Way.

Did you know?

The Centers for Disease Control and Prevention (CDC) was originally known as the Communicable Disease Center, which was formed to fight malaria. It was originally headquartered in Atlanta, Georgia, since the Southern states faced the worst threat from malaria.

Did you know?

As many as 28% of hospitalized patients requiring mechanical ventilators to help them breathe (for more than 48 hours) will develop ventilator-associated pneumonia. Current therapy involves intravenous antibiotics, but new antibiotics that can be inhaled (and more directly treat the infection) are being developed.

For a complete list of videos, visit our video library