chapter 5 ,6,7,8 Mankiw. The open economy , unemployment, Economic Growth 1, Economic growth 2.i...

Question

chapter 5 ,6,7,8 Mankiw. The open economy , unemployment, Economic Growth 1, Economic growth 2.

i will submit 4 short answers and i need back the answers after 30min. After i ll submit18 multiple choices and i need the answers after 30min.

You will have 1 hour to do the exam.

Same process we did 10 days ago and is the same class.Its very simple and easy.

David · Accepted Answer

1-Compare the impact of an increase in the government's budget deficit on investment spending in a 
small open economy with an otherwise comparable closed economy. Assume prices are flexible and 
that factors of production are fully employed in both economies. Assume there is perfect capital 
mobility for the small open economy. 
 
Answer: 
 
There would not be crowding out investment spending due to government budget’ deficit in a small 
open economy. In fact, there will be crowding out of net export. This is because increase in budget 
deficit causes interest rate to increase in the economy and therefore interest rate becomes higher 
than foreign interest rate. Due to this, there will be huge inflow of foreign capital which would keep 
the investment expenditure at the same level. The inflow will cause domestic currency to appreciate 
and as a result net export would fall. So there will be crowing out of net export not investment in a 
small open economy due to fiscal expansion. 
 
On the other hand, the increase in government's budget deficit in closed economy will cause 
crowding out of private investment due to increase in interest rate. 
 
2-The average unemployment rate in western Europe is higher than in the United States.  
a. Explain one difference between the European and U.S. economies that 
is consistent with more structural unemployment in Europe. 
Answer: 
There are higher minimum wage laws in Europe than in the U.S
b.

chapter 5 ,6,7,8 Mankiw. The open economy , unemployment, Economic Growth 1, Economic growth 2. i will submit 4 short answers and i need back the answers after 30min. After i ll submit18 multiple...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment