Ch 17 Flashcards
1
Q
Markets of SR equilibrium
A
Output Y=D
FX R = R* + (Ee-E)/E
Money Ms/P = L
2
Q
Determinants of CA
A
Real exchange rate (positive) + Disposable income (inverse)
3
Q
Value vs Volune
A
When real exchange rate rises
Value = Amt of $ you pay for € goods is higher in ST since € goods are worth more (before X has time to adjust)
Volume = currency cheaper, higher volume of goods bought by foreigners
4
Q
Value vs Volume when dominate?
A
Value when q changes if volumes of X and M don’t change much
Volume after 1 year or less (assumed ^E causes ^CA for now)
5
Q
Why ain’t agg demand vertical change 45 degrees?
A
You save some of your income AND buy imports so D inc by less than Y
6
Q
D<Y?
A
Too many goods, inventory ^^
