If you were in charge of macroeconomic policies in a small open economy, what qualitative effect would each of the following events have on your target for external balance?
Question
If you were in charge of macroeconomic policies in a small open economy, what qualitative effect would each of the
following events have on your target for external balance?
a. Large deposits of uranium are discovered in the interior of your country.
b. The world rice of your main export good, copper, rises permanently.
c. The world price of copper rises temporarily.
d. There is a temporary rise in the world price of oil.
Under a gold standard of the kind analyzed by Hume, describe how balance of payments equilibrium between two countries, A and B, would be restored after a transfer of income from B to A.
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