Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world. Explain how this increase in interest rates will affect each of the following for the Country X. Investment The international value of its currency Exports Using a correctly labelled aggregate demand and aggregate supply diagram, show how the change in investment you identified in part (a) will affect each of the following in the short run. Output The price level Identify one fiscal policy action that could counter the effect identified in part (b). Explain how this policy will affect each of the following. Output The price level Nominal interest rates i. Identify one monetary policy action that could counter the effects identified in part (b). ii. Using a correctly labelled money market graph, show how this policy will affect nominal interest rates. last 2 questions was not answered which is i &ii
Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world.
Explain how this increase in interest rates will affect each of the following for the Country X.
- Investment
- The international value of its currency
- Exports
Using a correctly labelled aggregate demand and
-
- Output
- The price level
Identify one fiscal policy action that could counter the effect identified in part (b). Explain how this policy will affect each of the following.
-
- Output
- The price level
- Nominal interest rates
i. Identify one
ii. Using a correctly labelled
last 2 questions was not answered which is i &ii
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