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Exercise 7

This document contains an exercise with 7 questions about macroeconomic concepts including: 1) The difference between the domestic goods curve and domestic demand curve. 2) The effect of an increase in foreign output on domestic output, exports, imports and net exports, shown graphically. 3) What the Marshall-Lerner condition represents. 4) The effect of a real depreciation on various macroeconomic variables, shown graphically assuming the Marshall-Lerner condition holds. 5) What the J-curve is and why it occurs. 6) The effect of a real depreciation on macroeconomic variables, shown graphically. 7) The effect of a reduction in

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Sunil Sharma
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102 views

Exercise 7

This document contains an exercise with 7 questions about macroeconomic concepts including: 1) The difference between the domestic goods curve and domestic demand curve. 2) The effect of an increase in foreign output on domestic output, exports, imports and net exports, shown graphically. 3) What the Marshall-Lerner condition represents. 4) The effect of a real depreciation on various macroeconomic variables, shown graphically assuming the Marshall-Lerner condition holds. 5) What the J-curve is and why it occurs. 6) The effect of a real depreciation on macroeconomic variables, shown graphically. 7) The effect of a reduction in

Uploaded by

Sunil Sharma
Copyright
© © All Rights Reserved
Available Formats
Download as RTF, PDF, TXT or read online on Scribd
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Exercise 7 (Chapter 19)

Econ 202
Macroeconomic Theory
G. Ertan zgzer

1) Explain why the demand for domestic goods curve (ZZ) has a different shape than the domestic demand curve (DD).

2) Using the ZZ/Y and NX graphs, illustrate graphically and explain what effect an increase in foreign output (Y*) will
have on output, exports, imports, and net exports. Clearly label all curves and clearly label the initial and final equilibria.

3) Explain what the Marshall-Lerner condition represents.

4) Assuming the Marshall-Lerner condition holds and using the ZZ/Y and NX graphs, illustrate graphically and explain
what effect a real depreciation will have on output, exports, imports, and net exports. Clearly label all curves and clearly
label the initial and final equilibria.

5) Explain what the J-curve is and why it occurs.

6) Assuming the Marshall-Lerner condition holds and using the ZZ/Y and NX graphs, illustrate graphically and explain
what effect a real depreciation will have on output, exports, imports, and net exports. Clearly label all curves and clearly
label the initial and final equilibria.

7) Using the ZZ/Y and NX graphs, illustrate graphically and explain what effect a reduction in taxes will have on output,
exports, imports, and net exports. Clearly label all curves and clearly label the initial and final equilibria.

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