MGEA06H3 Study Guide - Final Guide: Monetary Policy, Capital Outflow, Equilibrium Level

70 views7 pages
selahanna2005 and 40086 others unlocked
MGEA06H3 Full Course Notes
2
MGEA06H3 Full Course Notes
Verified Note
2 documents

Document Summary

Topic 12: part a open economy (review) Equilibrium level of output (y = ae: y* = aeo x 1/(1 cy) When r increases, cost of borrowing increases => i decreases => y decreases: it also has a significant impact on the exchange rate. When r increases, canadian assets become more attractive to invest => foreigners buy more canadian assets => capital inflows. Demand for c$ increases => c$ appreciates (e increases) E increases => x decreases & im increases => ae decreases => y decreases. Topic 12: part b effects of monetary and fiscal policies on flexible vs. Case 1: monetary policy under flexible exchange rate: example: the boc runs expansionary monetary policy, ms increases => r decreases => i increases => ae and y increases, 1st modification: Y increases => l (r, y) increases by a small amount. Offsets the initial effect of a decrease in r due to an increase in ms by a bit.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers

Related Documents