16 Jun HOW EXACTLY CAN YOU USE THE SPOT EXCHANGE MARKET TO PROTECT YOURSELF AGAINST THE EXCHANGE RATE RISK?
Show your calculations and give answers with 2 decimals when applicable.
1. Swan diagram Name all the axes and lines (specify which balance these lines correspond to). The economy is in a: show on the graph how a policy maker can bring the economy back to its internal and external balance. What is the situation in a in terms of its internal and external balance. Internal balance: External balance: What policy mix will be used?
2. Problems – open economy model – 2 large countries A and B A’s economy is characterized by the following equations. C = 30 + .8(Y-T) I = 20 G = 20 T = 20 X = 10 + .2 Y* IM = 10 + .2 Y
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ECON 472
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B’s economy is symmetrical (replace the variables without star by variables with stars and vice-versa) Set up the equilibrium relation for each country in the YY* space i.e. Y = f(Y*) as equation 1 and Y* = f’(Y) as equation 2 Y = __ (1) Y*= (2) Solve the system of equations to derive the joint equilibrium values of Y and Y* Y= Y*= Show the 2 relations (1) and (2) on the graph below and report the joint equilibrium – show the values of the intercepts and slopes. Y Now assume that country B raises tax: show the impact on the graph. Will equilibrium Y increase or stay the same or decrease Will equilibrium Y* increase or stay the same or decrease Y and Y* were originally equal since the model was symmetrical. What can you say now about the new equilibria Y’ and Y*’: is Y’>Y*’ or Y’=Y*’ or Y’ Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline. Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax. We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers. To make an Order you only need to click on “Order Now” and we will
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