ECON 103 Midterm: midterm2-eco103-05
Document Summary
The open-economy trilemma relates three macroeconomic objectives to each other. For each of the three policy objectives, give a period in history where this objective was sacri ced. Suppose a country"s economic analysts observe a sudden drop in international demand for domestic exports. The country"s monetary authorities are legally obliged to maintain a. Use an aa-dd diagram to illustrate the e ect. Discuss brie y the e ectiveness or ine ectiveness of temporary monetary expansions and temporary scal expansions for output changes under a oating exchange rate. China is under international pressure to revalue its xed currency to an appreciated new peg. Use an aa-dd-xx diagram to show the short-run e ect of a permanent currency revaluation on output and the current account when prices are sticky. Foreign bonds and domestic bonds are imperfect substitutes. Suppose the home central bank conducts a temporary sterilized purchase of foreign assets.
