a)
To change: Whether the statement “the interest rate parity condition shows that across the country interest rate is the same” is true or false
a)
Explanation of Solution
False, the given statement is false because the interest rate parity refers to keep the difference in the interest rate between the nations that change this into the forward exchange rate.
b)
To change: Whether the statement is true or false
b)
Explanation of Solution
True, the given statement is true because the condition of interest rate parity shows that as there is an increase in expected exchange rate then there will be an appreciation of the domestic currency, keeping the other things constant.
c)
To change: Whether the statement is true or false
c)
Explanation of Solution
It is true because if there is an expectation that the dollar will
d)
To change: Whether the statement is true or false
d)
Explanation of Solution
It is true, if there is appreciation in the expected exchange rate than the current exchange rate will immediately appreciate.
e)
To change: Whether the statement is true or false
e)
Explanation of Solution
The statement is true because the central bank changes the magnitude of the exchange rate by varying their domestic rate of interest in relation to the foreign interest rate.
f)
To change: Whether the statement is true or false
f)
Explanation of Solution
The given statement is false, that an increase in domestic interest rates, all other factors equal, does not increase exports.
g)
To change: Whether the statement is true or false
g)
Explanation of Solution
It is false to state that a fiscal expansion tends to increase net export keeping all other factors equal.
h)
To change: Whether the statement is true or false
h)
Explanation of Solution
The given statement is uncertain because the effect on output by the fiscal policy under fixed exchange rate and the flexible exchange rate is directly related to the economic situations. If the economic situations are in the favor of a fixed exchange rate then the output effect will be greater than the effect of flexible exchange rates or vice versa.
i)
To change: Whether the statement is true or false
i)
Explanation of Solution
It is false, United States central bank − the Federal Reserve (the Fed) − is charged with ensuring a certain degree of stability within the financial system of the country. The Fed has unique resources to allow adjustments to broad
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Chapter 19 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
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