Answered: c. Assume the recession in Braveland…

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter19: The International Monetary System: Order Or Disorder

Section: Chapter Questions

Problem 8DQ

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c. Assume the recession in Braveland causes a decrease in the demand for
Macroland dollars in the foreign exchange market. Braveland’s currency is the euro.
i. Explain whether the euro will appreciate, depreciate, or remain
unchanged against the dollar
ii. Draw a correctly labeled graph of the foreign exchange market for
dollars and show the effect of the decrease in demand for dollars on the
exchange rate for dollars.

d. Macroland implements a combination of expansionary fiscal and monetary policies. What will be the effect of these policies on each of the following?
i. Aggregate demand in Macroland
ii. The price level in Macroland
iii. Explain the effects of expansionary fiscal policies on interest rates in
Macroland.
iv. Explain the effects of expansionary monetary policies on interest rates in Macroland.

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