Log in
Economics
3
answers
0
watching
128
views
8 Jan 2018

Assume that you are an economic advisor and your focus is on understanding the different types of exchange rate systems. You have been hired to understand the shifts in monetary policy and their influence on monetary policy. The only causes of fluctuations in stock prices are unexpected shifts in monetary policies. Now, your task is to explain whether a fixed or floating exchange rate system would cause greater gains from international asset trade. In your answer, focus on the change in policy with regard to monetary policy and its influence on exchange rates.

Watch
3
answers
0
watching
128
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share
Already have an account? Log in
Share
Trinidad Tremblay
Trinidad TremblayLv2
9 Jan 2018
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Assume that you are an economic advisor and your focus is on understanding the different types of exchange rate systems. You have been hired to understand the shifts in monetary policy and their influence on monetary policy. The only causes of fluctuations in stock prices are unexpected shifts in monetary policies. Now, your task is to explain whether a fixed or floating exchange rate system would cause greater gains from international asset trade. In your answer, focus on the change in policy with regard to monetary policy and its influence on exchange rates.

I sent this post in earlier but got the wrong response, I need a essay on the topic answering the following points with a conclusion. This is the topic : Money and the prices in the long run and open economies

Here are the points or bullets:
(1) analyze the history of changes in GDP, savings, investment, real interest rates, and unemployment and compare to forecast for the next five years.
(2)discuss how government policies can influence economic growth.
(3)analyze how monetary policy could influence the long run behavior of price levels, inflation rates, costs, and other real or nominal variables.
(4)described how trade deficits or surpluses can influence the growth of productivity and GDP.
(5)discuss the importance of the market for loanable funds and the market for foreign currency exchange to the achievement of the strategic plan.
(6)recommend, based on your above findings, whether the strategic plan can be achieved and provide support.

I need an introductory to the topic also.

MBA502, Economics for Business

Apply and Discover 7.2

You are responsible for economic policymaking in your country. Your desire is to eliminate inflation, keeping prices absolutely stable at P = 100, no matter what happens to output. Currently, the economy is in equilibrium at Q = 3200 (where Q = potential GDP) and P = 100. You can use monetary and fiscal policies to affect aggregate demand but you cannot affect aggregate supply in the short run. How would you respond to the following scenarios?

Explain and illustrate how each of these events would affect aggregate demand, aggregate supply, and prices, then explain how you would respond with economic policies.

1. A surprise increase in investment spending

In the short run, when investment spending increases, it results in an increase in Aggregate Demand (AD), which in turn pushes up both GPD and the price index.

To counterbalance this development, government might pursue contractionary fiscal policy by increasing taxes (to reduce consumption) or decreasing its own investment and spending so that the AD curve shifts back to its original position. Alternatively, the government can pursue contractionary monetary policy by reducing money supply and increasing interest rate to discourage economic activity.

2. Catastrophic floods that cause a sharp food price increase

In this case, sharp food shortages and consequent price increases cause a shock-type adjustment of the aggregate supply curve (it shift up and to the left). The result is a lower GDP and a higher price level.

The government cannot do anything to adjust AS in the short run. However, if the goal is to maintain the price level constant, the government can decide to do something to decrease the aggregate demand to force prices to come down, though it will be accompanies by another contraction in GDP and so it would not be a smart thing to do.

To cause AD to decrease, the government, similar to example above, can pursue fiscal policy (increase taxes, decrease spending) or monetary policy (reduce supply of money to the economy and thus increase interest rates).

3. A productivity decline that reduces potential output

In this case, AS shifts to the left, as was the case in example 2. As a result, price levels go up, as the same amount of money is chasing the reduced amount of goods and services, and GDP declines.

Government remedies here would be centered about causing AD to decrease through contractionary fiscal (higher taxes, lower spending) or monetary (reduce money supply and increase interest rates) policy. Again, this decision reduces inflation but at expense of GDP, as real output shrinks further.

4. A deep depression in East Asia that causes a sharp decrease in net exports to the United States

A decrease in exports of goods to from the United States to Asia will mean that the aggregate demand (which includes net exports

Show transcribed image text

Related Documents

ECS-3200
Final Exam
Study Guide
ECS-3200 Study Guide - Final Guide: Special Drawing Rights, Infant Industry Argument, Chaebol
maroonsquirrel894
ECO365H1 Lecture Notes - Fax, Currency Substitution
blackclam898
ECO102H1 Lecture Notes - Lecture 9: Foreign Exchange Market, The Foreign Exchange, Federal Funds Rate
chocolatezebra335

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in