Ask Question, Ask an Expert


Ask Microeconomics Expert

Suppose that, as of the end of 2005, a country's money supply is $1,200 million and the central bank's holdings of domestic assets (a.k.a. domestic credit) are equal to $800 million. The country maintains a xed exchange rate, and prices are sticky. Each period, the central bank is prepared to monetize any government budget decit if necessary, i.e. to purchase newly issued government bonds in the amount equal to the size of the budget decit for the respective period of time. Suppose that there is no budget decit by the year 2005.

a. find out the value of total internaional asset holdings (a.k.a. international reserves) of the central bank as of the end of 2005. Illustrate this situation on a central bank balance sheet diagram.
b. Now, suppose the government unexpectedly runs a $100 million decit in the year 2006 and the money supply is unchanged. Illustrate this change on your diagram. What is the new level of reserves?
c. If the decit is unexpected, will the central bank be able to defend the xed exchange rate?
d. Suppose the government runs a decit of $100 million each year from this point forward. What will eventually happen to the central bank's reserves?
e. In what year will the central bank be forced to abandon its exchange rate peg and why?
f. What if the future decits are anticipated? How does your answer to (e) change? describe briefly.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M938330
  • Price:- $40

Guranteed 36 Hours Delivery, In Price:- $40

Have any Question? 

Related Questions in Microeconomics

Assignment1perform an industry analysis for each of ibms

Assignment 1. Perform an industry analysis for each of IBM's top market segments: services, software, and hardware. Are these attractive industries? Why or why not? 2. Looking at IBM's RCCs, can IBM gain and sustain a co ...

Hospitality economic reportformat individual report limited

Hospitality Economic Report Format: individual report, limited to 1500 words - use them wisely! The task is to produce a concise yet critical report, provide recommendations and recognise limitations of what you are reco ...

Key informationusing the readings supplied critically argue

KEY INFORMATION Using the readings supplied, critically argue in support of a single one of the following interventions to improve housing affordability: 1. Restricting credit to acquire property (e.g. tax added to mortg ...

Assignment elasticity and its applicationover the last year

Assignment: Elasticity and Its Application Over the last year your boss has noticed that it would be useful for your firm to understand how consumers behave when variables in the market change and how these changes affec ...

For this first project you will produce a microeconomic

For this first project, you will produce a microeconomic analysis related to a publicly traded Apple company Your individual microeconomic analysis paper should respond to the following prompt: Assess how microeconomic v ...

Assignmentbulllaw of bailment1borrow your friends car and

Assignment • Law of bailment. 1.Borrow your friend's car and scratch the car against the wall. What's your duty that you must be responsible for? 2. If you rented from car rental agency, what would be your duty and where ...

Microeconomics - price floorassignmentin a perfectly

Microeconomics - Price Floor Assignment In a perfectly competitive market, the equilibrium price and quantity represent the most efficient operation of that market. Optimum efficiency means that sellers cannot be made be ...

Assignmentterm projectfor this course you will assume the

Assignment TERM PROJECT For this course, you will assume the role of a manager or legal advisor and create a PowerPoint presentation for an organizational employee meeting. The subject of the presentation will be complia ...

Assignmentyou have been offered a paralegal position with a

Assignment You have been offered a paralegal position with a firm in Raleigh, NC. A local winemaker has contacted your firm for legal assistance. No one in the firm knows anything about this subject but would like to exp ...

Assignment1in homework 1 we solved the equilibrium in the

Assignment: 1. In homework 1 we solved the equilibrium in the beer market represented by the following supply and demand functions: Q d = 20 - 4p +2p w + 3Y + 15HOLIDAY Q s = -4 + 26p - 2p g - 1p t Q = pints of beer (in ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate