What lessons did Mexico's policy makers learn from the 1980s debt crisis? What reforms did President Salinas pursue? What were his main goals?
What will be an ideal response?
Policy makers learned that their management of the macroeconomy had to improve (don't ignore budget and trade deficits); that markets need to play a larger role in resource allocation to increase competitiveness and attract capital; that ISI policies were no longer best for industrial development, and to instead follow more traditional ideas of comparative advantage. President Salinas continued working to bring the federal budget under control, increased the rate of privatization of state-owned businesses, put Mexico in line to qualify for U.S. debt relief under the Brady Plan, reduced tariffs and important licensing requirements, and proposed a free trade agreement with the United States. He hoped to tie up the domestic economic reforms Mexico had made through an international treaty and to attract foreign capital for the development of Mexico's economy.
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Suppose that there is no government and no international trade. When C + I is less than the level of real GDP
A) unplanned inventories increase, and real GDP contracts. B) unplanned inventories decrease, and real GDP expands. C) real planned investment spending equals real planned saving. D) unplanned inventories equal zero, and there is no change in the level of real GDP.
Explain how interest rates and bond prices are related to one another. Why is this important for monetary policy?
Elasticity of demand Quantity Price A 4 15 B 12 6
What will be an ideal response?
In equilibrium, if both covered interest parity and uncovered interest parity hold, the expected future spot rate is equal to
A) the current spot rate B) the expected forward rate C) the future spot rate D) the current forward rate