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Econ 476 Assignment 1




Econ 476 Assignment 1;ECON 476v7;Assignment 1;Assignment 1 is worth 15% of your final grade and should be done after you have completedUnits 1 through 5. Read the requirements for each question and plan your responsescarefully. Answer all five questions.;Although your responses should be concise, ensure that you answer all portions of each;question completely. The objective of this assignment is for you to synthesize the material;presented in Units 1 through 5, and to consider each question rationally and logically.;1. Use the IS/LM/BP model to illustrate and explain how the degree of capital mobility;affects fiscal policy under fixed exchange rates.;2. Suppose that you observe the following exchange rates;$2/?, $.0075/?, and ?.005/?.;Is there cross-rate equality? If yes, why? If not, what would you expect to happen?;3. If you wanted to assess the competitiveness of a country, would you focus on its spot;exchange rate, its real exchange rate, its effective exchange rate, or some other;measure of the country?s currency?s value? Explain.;4. Using the IS/LM/BP model and assuming perfect capital mobility, explain;a. how an increase in foreign income affects domestic output.;b. how a devaluation of the domestic currency affects domestic output.;5. Consider the following Keynesian income model;E = C + I + G + X-M;C = 215 + 0.82Yd;Yd = Y ? T;T = 60 + 0.33Y I = 400;G = 620;X = 310;M = 50 + 0.20Y;In equilibrium, Y = E;a. calculate the equilibrium level of income.;b. calculate the amount of taxes collected when the economy is at equilibrium level;of income and show whether the government budget is in surplus or deficit.;c. calculate the value of net exports when the economy is at equilibrium level of;income.


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