Assuming the Marshall-Lerner condition holds and using the ZZ/Y and NX graphs, illustrate graphically and explain what effect a real appreciation will have on output, exports, imports, and net exports. Clearly label all curves and clearly label the initial and final equilibria
What will be an ideal response?
A real appreciation will cause NX to fall. The fall in NX will cause a decrease in demand. As demand falls, Y will decrease causing a fall in C and S. As Y decreases, imports will decrease as well. As shown in the text, the decrease in imports will be less than the fall in exports. So, NX will be lower.
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The reserve ratio is
A. the ratio of loans to available reserves. B. the ratio of available reserves to loans made. C. the percentage of every dollar deposited in a checking account that a bank may loan out. D. the percentage of every dollar deposited in a checking account that a bank must maintain in reserves.
If some activity creates positive externalities as well as private benefits, then economic theory suggests that the activity ought to be:
A. left alone under the idea of laissez faire. B. subsidized. C. taxed. D. prohibited.
In an economic model, an endogenous variable is
A) a stand-in for more complicated variables. B) determined by the model itself. C) determined outside the model. D) a variable that has no effect on the workings of the model.
Monopolistic and perfect competition are alike in that: a. a firm's long-run equilibrium output is located where long-run average total cost is increasing. b. a firm's long-run equilibrium output is located where long-run average total cost is minimized. c. firms earn a normal rate of return in the long run
d. firms are price takers.