Homework SourseExplain ceteris paribus how each of the following changes wo
Solution
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Answer to part a- In this we have to explain the impact on the US market if China announces that it will do international trade buying Yuan currency US currency and is there long standing currency peg to US dollar. this decision of China will affect US market because now if China will international trade more in you want and not in US dollar it will have to take less US dollar due to which the interest which US economy used to and from China will decrease so this decision of China would affect us economy in respect of interest rates. as per the is IS-LM model and F/X model the US economy will see our change in their GDP interest rate even a decrease in US dollar because IS LM model shows the relationship between investment and savings market and money market the IS-LM brings the equilibrium between the two markets. so now if China decide to use less of US dollar then there will be decrease in US dollar in the market which will lead to lower US dollar. according to effects model China limit is use of US dollar in international trade then foreign exchange rate will bless and resulting a decrease in it will be a decrease in interest rate and overall decrease in GDP of US.
Answer to part B- in preparation of G-20 meeting in Toronto, France, Germany Russia and UK announces draconian deficit cutting goals this will affect the US business because if there will be very strict deficit cutting goals then they will affect the foreign exchange market in that they will affect them interest rates in US. ceteris paribus very strict deficit cutting goals in any way it will have an negative effect on the US economy. as per f/x model is there will be draconian deficit cutting gold in Toronto France Germany Russia and UK then us economy will have an effect because most of the countries mentioned over here trade internationally with us and when there will be strict deficit cutting then it will have effect on international business as well which will simultaneously affecting GDP of USA.
Answer to part c- there is a decline in sale and home prices in US as government home purchase subsidy has expired now this will have effect on US business as there is less sale of home because the prices declined the market is in depletion mode the government home purchase subsidy was up help to the people because the prices of the home YouTube will be used with buy the home but now as the government home purchase subsidy has expired then the market is same or decrease in the Purchase and sale of home as per the IS-LM model there is is not a good equilibrium achieved between investment and savings market and money market and now the people have will have to use their more saving in buying a home and their investment will be higher So because of this the sale is declined. everything clearly see this will have an effect on the GDP Overall.
Answer to part d- the condition given here is that in order to curtail the deteriorating economic conditions confidence in the Euro Zone the European Central Bank implements a significant open market for buy of significant propositions. in this condition the effect on the US will be this that if European Central Bank coupons for buy of significant propositions eurozone deteriorating conditions can improve download US significant increase it will be used internationally for buying those propositions. this condition is expected to have a positive result because internationally for buying any propositions the US dollar is used but later it can see decline rate of Euro in international market will increase and there will be more proposition of it in the market and it will affect the US dollar price internationally. if we see the f/x model then foreign exchange rate will change this can be favourable or not. so we can clearly see that in all the conditions there can be positive or negative effect.
