ECON 219 Lecture Notes - Lecture 11: Autarky, Devaluation, Barter
10
ECON 219 Full Course Notes
Verified Note
10 documents
Document Summary
Return to the story of devaluation as an instrument also revaluation, manipulating the exchange rate. Focus on the downside of exchange rate manipulation (devaluation) stimulative effect because devaluing currency causes the effect on the x-m part of your equation, and you improve your bot by exports > imports. If when you do that the claim is you have added to injections, and the net extra injections stimulate the economy. 3 dimensions in small/medium countries: 2 definitions of terms of trade, devaluation for hume is always a bad thing, trades of barter are going against you. We are price takers in all markets. Perfect competitor faces horizontal demand curve: from view of bop, the x part (pxq value) has increased, consequence of devaluation, the local price goes up by 10% Terms of trade price & quantity: hume case: when you devalue, you increase export quantity, but decrease import quantity barter terms of trade have moved against you.
