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

Author Question: What are the effects of an expansionary monetary policy on interest rates and output in an open ... (Read 77 times)

KimWrice

  • Hero Member
  • *****
  • Posts: 579
on: Jun 30, 2018
What are the effects of an expansionary monetary policy on interest rates and output in an open economy with fixed exchange rates?
 
  What will be an ideal response?

Question 2

A key characteristic of the production function in the endogenous growth model presented in the text is that
 
  A) there are increasing returns to scale in human capital.
  B) there are decreasing returns to scale in human capital.
  C) there are constant returns to scale in human capital.
  D) at low levels of human capital, there are increasing returns to scale in human capital, while at high levels of human capital, there are decreasing returns to scale in human capital.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

millet

  • Sr. Member
  • ****
  • Posts: 354
Reply #1 on: Jun 30, 2018
Answer to Question 1

With an expansionary monetary policy in an open economy with fixed exchange rates, so long as the real interest rate can still go lower, the MP curve shifts down, which leads to a higher output gap and decreases the real interest rate. The lower real interest rate makes investment less attractive in the United States, so net capital outflows increase. The dollar depreciates in value, and net exports and output increase. If the real interest rate can not go any lower, then the downward shift of the MP curve will not change the output gap or capital flows. In this case, expansionary monetary policy will not be effective in stimulating the economy and increasing real GDP.

Answer to Question 2

C


KimWrice

  • Member
  • Posts: 579
Reply 2 on: Jun 30, 2018
Gracias!

alvinum

  • Member
  • Posts: 317
Reply 3 on: Yesterday
Excellent

« previous next »
 

Did you know?

Adolescents often feel clumsy during puberty because during this time of development, their hands and feet grow faster than their arms and legs do. The body is therefore out of proportion. One out of five adolescents actually experiences growing pains during this period.

Did you know?

Individuals are never “cured” of addictions. Instead, they learn how to manage their disease to lead healthy, balanced lives.

Did you know?

For high blood pressure (hypertension), a new class of drug, called a vasopeptidase blocker (inhibitor), has been developed. It decreases blood pressure by simultaneously dilating the peripheral arteries and increasing the body's loss of salt.

Did you know?

Persons who overdose with cardiac glycosides have a better chance of overall survival if they can survive the first 24 hours after the overdose.

Did you know?

Prostaglandins were first isolated from human semen in Sweden in the 1930s. They were so named because the researcher thought that they came from the prostate gland. In fact, prostaglandins exist and are synthesized in almost every cell of the body.

Cheetah at the Werribee Open Range Zoo Cheetah at the Werribee Open Range Zoo
The Pleiades, an open cluster of stars in the constellation of Taurus. These stars share a common mo The Pleiades, an open cluster of stars in the constellation of Taurus. These stars share a common mo
Inhibition of cyclooxygenase 1 and 2. Nonselective NSAIDs block the cytoprotective effects as well ... Inhibition of cyclooxygenase 1 and 2. Nonselective NSAIDs block the cytoprotective effects as well ...
Change in air temperature at various air flow rates for a 4 pass operation Change in air temperature at various air flow rates for a 4 pass operation
Summary of the Effects of Massage Cont. Summary of the Effects of Massage Cont.
After 159 days,she paid a maturity value of $11,626, which included interest of $814. After 159 days,she paid a maturity value of $11,626, which included interest of $814.
Video: Attention Deficit Disorder (ADD)

For a complete list of videos, visit our video library