This question considers long-run policies in Argentina, the home country, relative to Brazil. Assume Argentina's money growth rate is currently 4% and its inflation rate is 2%. Brazil's money growth rate is 6% with 3.25% inflation rate. The world real interest rate is 0.75%. For the following questions, use the conditions associated with the general monetary model where money demand depends on the nominal interest rate. Define the nominal exchange rate E as Argentine pesos per Brazilian real. 1. Calculate the growth rate of real income in Argentina, report the percentage number (so if the answer is 5% report "5") 2. Calculate the growth rate of real income in Brazil, report the percentage number (so if the answer is 5% report "5") 3. What is the interest rate differential between Argentina and Brazil 4. Calculate the expected depreciation rate of the Argentinian peso relative to the Brazilian Real

This question considers long-run policies in Argentina, the home country, relative to Brazil. Assume Argentina's money growth rate is currently 4% and its inflation rate is 2%. Brazil's money growth rate is 6% with 3.25% inflation rate. The world real interest rate is 0.75%. For the following questions, use the conditions associated with the general monetary model where money demand depends on the nominal interest rate. Define the nominal exchange rate E as Argentine pesos per Brazilian real. 1. Calculate the growth rate of real income in Argentina, report the percentage number (so if the answer is 5% report "5") 2. Calculate the growth rate of real income in Brazil, report the percentage number (so if the answer is 5% report "5") 3. What is the interest rate differential between Argentina and Brazil 4. Calculate the expected depreciation rate of the Argentinian peso relative to the Brazilian Real

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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