o Intermediate Macroeconomics Lecture 14
Intermediate Macroeconomics Lecture 14
●●●| Effects of policies on real ex-rate Home fiscal policy(expansionary S↓→(-D)↓ Domestic currency invested abroad Domestic currency appreciates → Nominal ex-rate↑ Real ex-rate f(if prices do not change) >Domestic goods become more expensive Exports↓& imports↑ NX I
2 Effects of Policies on Real Ex-rate 1. Home fiscal policy (expansionary) → S ↓→ (S – I) ↓ → Domestic currency invested abroad ↓ → Domestic currency appreciates → Nominal ex-rate ↑ → Real ex-rate ↑(if prices do not change) → Domestic goods become more expensive → Exports ↓ & imports ↑ → NX ↓
●●● Effects of policies on rea|Ex-rate NX(E)
3 Effects of Policies on Real Ex-rate NX ε S-I NX(ε)
Oo. Effects of Policies on Real Ex-rate 2. Fiscal policy abroad (expansionary) Foreign↓ → foreign(S-)↓ →「*↑→1↓→(S-)↑ → Supply of domestic currency↑ → Nominal ex-rate↓ → Real ex-rate」 f prices keep the same) Domestic goods become cheaper → Exports↑& imports↓
4 Effects of Policies on Real Ex-rate 2. Fiscal policy abroad (expansionary) Foreign S ↓ → foreign (S-I) ↓ → r*↑→ I ↓→ (S-I) ↑ → Supply of domestic currency ↑ → Nominal ex-rate ↓ → Real ex-rate ↓(if prices keep the same) → Domestic goods become cheaper → Exports ↑ & imports ↓ → NX↑
●●● Effects of policies on rea|Ex-rate S-I NX(E) 5
5 Effects of Policies on Real Ex-rate NX ε S-I NX(ε)