MGEC61H3 Study Guide - Midterm Guide: Regrading, Exchange Rate, Government Spending

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEC61H3
• Professor: Iris Au

Document Summary

Part (a) (15 points) 1 point will be subtracted for each incorrect entry. Part (b) (5 points) (4 pts for explanation) Change in a country"s foreign wealth = ka = (kanon-res + ort: when ka is negative, this implies the country is a net purchaser/importer of assets its holding of foreign assets . Besides, you should show what happens to all three countries not just what happens to one country. Question 2 (20 points) ( 2 pts from the whole question for not having 4 decimal points) Part (a) (4 points: expected exchange rate, ee: (2 pts 1 pt for showing work & 1 pt for the answer) Ee = p/p* = 3/6 = 0. 5: exchange rate, e: (2 pts 1 pt for showing work & 1 pt for the answer) Part (b) (4 points: new money demand: l(r, y) = 0. 36y 15000r (1 pt, new expected exchange rate: ee = 0. 46 (1 pt, domestic interest rate, r: (1 pt)