Economics Answers

what are the limitation and strength of neoclassical theory in understanding the behavior of a firm.

Can you thoroughly explain the effects of an increase in unemployment benefits on the position of the AD and As curves in the short and medium run? Plus, I have no idea why that moves the LM curve. Can you explain why? please...

Imagine the following open economy: C = 50 + 0.75YD, I = 50 0.5i, t = 0.1, G = 100, Im = 0.1Y , Ex = 100. Calculate the slope of the IS curve.
(a) slope of the IS curve = ...

What is assumed in the Mundell-Fleming model about goods prices? (several answers can be correct)
(a) They are fixed because the economy is operating below its full capacity.
(b) They are fixed because the economy is operating at its full capacity.
(c) They are flexible because the economy is operating at its full capacity.
(d) There are no assumptions about the goods prices because the model does not treat them explicitly.

An equilibrium in the Mundell-Fleming model implies that (Several answers possible)... (a) the goods market is in equilibrium.
(b) the labor market is in equilibrium.
(c) the money market is in equilibrium.
(d) the balance of payments is zero without government/central bank intervention.

Imagine a Mundell-Fleming economy with fully immobile capital and mark the correct state- ments.(several answers correct)
(a) Fiscal policy is ineffective in boosting the economy in a fixed exchange rate regime. (b) Fiscal policy is effective in boosting the economy in a flexible exchange rate regime.
(c) Monetary policy is effective in boosting the economy in a flexible exchange rate regime. (d) Monetary policy is ineffective in boosting the economy in a fixed exchange rate regime.

Mark correct statements about monetary policy in the Mundell-Fleming model with fully mobile capital.(several answers possible)
(a) Monetary policy is not effective in fixed exchange rate regimes because of the need of sterilization of monetary interventions.
(b) Monetary policy is not effective in fixed exchange rate regimes because of the limited reaction of foreign investment.
(c) Monetary policy is effective in the flexible exchange rate regime because money supply can be determined exogenously.
(d) The effectiveness of monetary policy is not limited by the liquidity trap.

Mark policy tools in the Mundell-Fleming model that are not effective in the economy. (a) Lowering taxes in a flexible exchange rate regime.
(b) Lowering government expenditure in fixed exchange rate regime.
(c) A one-time devaluation of currency in a fixed exchange rate regime.
(d) Expansionary fiscal policy in flexible exchange rate regime.

Mark correct statements about the FE curve in the Mundell-Fleming model.
(a) With perfectly mobile capital, the FE curve moves parallely up or down only if the world interest rate changes.
(b) The FE curve depicts all combinations of the nominal exchange rate and GDP that guarantee an equilibrium on the FE market.
(c) The FE curve is obtained using the condition CA + CP = 0.
(d) If capital flows are fully restricted, the FE curve is vertical.

The Mundell-Fleming model is a model of (several answers possible): (a) small open economy in the short run (b) a large open economy in the short run (c) a small open economy in the long run (d) a small closed economy in the short run