How is the impact of expansionary monetary policy different in an open economy than in a closed economy?
What will be an ideal response?
In an open economy, the lower interest rate resulting from expansionary monetary policy will affect not only consumption and domestic investment, but it will also affect net exports and net capital flows. Lower interest rates will decrease capital inflows and increase capital outflows, resulting in a decrease in the exchange rate (when stated in terms of foreign currency per domestic currency) which will increase net exports. The result is that monetary policy has a stronger effect in an open economy than in a closed economy.
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Refer to the above figure. A long-run equilibrium in monopolistic competition is pictured by
A) Panel A. B) Panel B. C) Panel C. D) Panel D.
If the U.S. national income is ten times the national income of Canada and the MPC in the US is 0.75 while it is 0.90 in Canada, then
a. the MPS is greater in the U.S. but consumption is greater in Canada b. the MPS is greater in the U.S. but saving is greater in Canada c. the MPS is greater in Canada but saving is greater in the U.S. d. both the MPS and saving is greater in Canada e. both the MPS and saving is greater in the U.S.
Given that price is constant, the lower the marginal utility of a good as more of the good is consumed the:
A. fewer substitutes there are. B. more you are willing to buy of it. C. more substitutes there are. D. less you are willing to buy of it.
If MRS's are equal across all consumers, then the efficient product mix has been achieved
Indicate whether the statement is true or false