Entries by Hannah Wangui

The AA schedule shows combinations of output and exchange rate at which two asset markets, namely the foreign exchange market and the money market are simultaneously in short-run equilibrium.

November 27, 2020 in /by

 The AA schedule shows combinations of output and exchange rate at which two asset markets, namely the foreign exchange market and the money market are simultaneously in short-run equilibrium. a) Why does the AA schedule slope downwards? b) Consider an increase in the domestic money supply. What is the effect on nominal exchange rate? Has the output changed? […]

 

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In the Ricardian model, suppose that Home has a MPL = 2 in Cloth and MPL = 4 in Wheat. Foreign has a MPL=2 in Cloth and MPL=6 in Wheat

November 27, 2020 in /by

In the Ricardian model, suppose that Home has a MPL = 2 in Cloth and MPL = 4 in Wheat. Foreign has a MPL=2 in Cloth and MPL=6 in Wheat. Suppose also that the price of Wheat is $1 (per bushel). When the two countries trade and fully specialize, we can deduce that the new […]

 

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In the Ricardian Model, suppose that Home has a comparative advantage in Cars and Foreign has a comparative advantage in Wheat

November 27, 2020 in /by

In the Ricardian Model, suppose that Home has a comparative advantage in Cars and Foreign has a comparative advantage in Wheat. Suppose also that they have the same number of workers, and that the marginal product of labor in the Car industry is lower in Home than in Foreign. What can we deduce for two […]

 

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In the Specific-Factor Model with Land being used in Agriculture, Capital in Manufacturing, and Labor being mobile across the two industries.

November 27, 2020 in /by

In the Specific-Factor Model with Land being used in Agriculture, Capital in Manufacturing, and Labor being mobile across the two industries. Suppose that the price of agricultural goods decreases by 5%, the price of manufacturing goods increases by 5% and the marginal product of capital increases by 2%. Which outcome is possible? The relative income […]

 

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