Macroeconomics Assignment 2
Autor: ivybing • October 15, 2018 • Coursework • 771 Words (4 Pages) • 490 Views
Macroeconomics Class Assignment 2
Name: Sun Dianyong
Student ID: 1600015965
Problem 1. Readings: Look at the newspapers and magazines for the past few weeks. Are there any discussions about the international capital flow, exchange rate or unemployment rate? How do you interpret these discussions?
Answer:
Total value of imports and exports in Aug 2017 is 356.4 billion dollars, and the growth rate is 8.8%. The recent month of total value of imports and exports can be shown in the following graph.
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The accumulated foreign direct investment in 2017 until August is 81.5 billion dollars. The recent number of projects for contracted foreign direct investment can be shown in the following graph.
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About the exchange rate: RMB is fluctuating recently. In The 19th National Congress of the Communist Party of China, vice president of the People’s Bank of China Yi Gang pointed out that the RMB exchange rate mechanism is basically perfected, being very close to the market-oriented RMB exchange rate formation mechanism, and fluctuation is quite normal.
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Problem 2. Consider an economy described by the following equations:
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a) In this economy, solve for national saving, investment, the trade balance, and the equilibrium exchange rate.
Answer:
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b) Suppose now that G rises to 1250. Solve for national saving, investment, the trade balance and the equilibrium exchange rate. Explain what you find.
Answer:
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Findings: The increase in government spending reduces national saving, with domestic investment held constant, and thus lowering the supply of dollars to be invested abroad. The lower supply causes the equilibrium real exchange rate to rise and dollar becomes more valuable. Since the rise in the value of the dollar, domestic goods become more expensive relative to foreign goods, which causes exports to fall and imports to rise. The net exports thus reduce.
c) Now suppose that the world interest rate rises from 5 to 10 percent. G is again 1000. Solve for the national saving, investment, the trade balance and the equilibrium exchange rate. Explain what you find.
Answer:
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Findings: The increase in the world interest rate reduces domestic investment I, which increases the supply of dollars, causing the real exchange rate to fall, and raises net exports.
Problem 3. Consider an economy with the following Cobb-Douglas production function:
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