How does the open-economy IS-MP model incorporate net exports with a fixed exchange rate system?
What will be an ideal response?
Under a fixed exchange-rate system, changes in the real interest rate do not change the nominal exchange rate, so net exports do not change as the real interest rate changes. The IS curve under a fixed exchange-rate system is similar to the IS curve for a closed economy.
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An example of a horizontal integration would be a merger between
a. a newspaper and a television station. b. two grocery store chains. c. Intel and Dell. d. Delta Airlines and American Airlines.
"Moving along the AS curve, the real wage rate is constant while moving along the potential GDP line, the real wage rate changes." Explain whether the previous statement is correct or incorrect
What will be an ideal response?
The crowding in of private investment is associated with: a. a leftward shift of the aggregate demand curve for an economy
b. a leftward shift of the aggregate supply curve of an economy. c. a reduction in the level of government spending. d. a reduction in corporate income taxes. e. an increase in aggregate demand induced by increased government borrowing.
Which of the following statements explains the situation when the United States consistently has a large current account deficit over time?
a. The United States exports a larger amount of goods and services than it imports. b. The United States sends more capital abroad than it receives from abroad. c. The United States receives more transfers from abroad than it sends abroad. d. The United States sells more assets to foreigners than it purchases from foreigners.