(Answered) Fiscal policy monetary policy and current accountconsider

Economics

Fiscal Policy, Monetary Policy and Current Account

Consider the following comment:"The current account depends upon income and the real exchange rate. If income rises,consumption of imports is high and the current account worsens. Thus, if monetary policy is theonly tool that authorities can respond with quickly, a worsening of the current account due to arise in income (for example, because of a temporary tax cut) requires a monetary contraction tomoderate the rise in income and stop the deterioration of the current account."

(a) Use the DD-AA diagram to analyze the effects of a temporary tax cut on income and the current account.

(b) Do you find that the CA worsens and that income rises, as suggested in the comment?

(d) Does this monetary policy response moderate the rise in income? Does it reverse the deterioration of the CA?

View complete question

Business Economics, Economics

Category:- Business Economics
Reference No.:- M92215144
Price:- $20

Verified Expert

Priced at $40 Now at $20, Verified Solution

Have any Question?Write your Review or question?

Related Questions in Business Economics

Consider the following production function that is already

Consider the following production function that is already written in per worker terms: y = Akαh 1-α where h represents human capital per worker. Suppose we are given the following information: capital per worker in an e ...

Having trouble trying to understand how to summarize a

Having trouble trying to understand how to summarize a companies business activities... Please complete the following in order to help me better understand: For this example, use Costco. Please put together a description ...

A recent study revealed that 60 of employees use their

A recent study revealed that 60% of employees use their smart phone during work hours for non-work related purposes. Suppose you randomly observe 100 employees and record whether the employee is using their phone for non ...

What is the result of a price ceiling and why do some

What is the result of a price ceiling? And why do some consumers tend to favor price ceilings and others tend to oppose it?

If two samples a and b had the same mean and sample size

If two samples A and B had the same mean and sample size, but sample A had a larger standard deviation, which sample would have the wider 95% confidence interval?

The table to the right shows the results of a survey in

The table to the right shows the results of a survey in which 2585 adults from Country A, 1116 adults from Country B, and 1064 adults from Country C were asked if human activity contributes to global warming. Complete pa ...

What happens if wages and prices adjust very slowly in

What happens if wages and prices adjust very slowly in response to various shocks to the economy? Does this make business cycle, i.e. expansions and contractions in the economy, shorter or longer?

Matt sells watermelons on the side of the road the weight

Matt sells watermelons on the side of the road. The weight of a watermelon has a normal distribution with mean = 9.5 lbs and the standard deviation = 4 lbs. If he loads 100 watermelons on to his truck, what is the probab ...

Qxd 14 - 12 pxnbspnbspnbspandnbspqxs 14pxnbsp-

QXd = 14 - (1/2) P X and QXS = (1/4)P X - 1 a. Determine the equilibrium price and quantity. Show the equilibrium graphically. b. Suppose a $12 excise tax is imposed on the good. Determine the new equilibrium price a ...

Tom works for a fruit company and found that the weights of

Tom works for a fruit company and found that the weights of pineapples are normally distributed with mean = 500 grams and standard deviation = 100 grams. a. If he randomly chooses 16 pineapples and measures their weights ...

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

Recent Questions

Ask Business Economics Expert