Fakultät III Univ.-Prof. Dr. Jan Franke-Viebach

Transcription

1 Unv.-ro. Dr. J. Franke-Vebach 1 Unverstät Segen Fakutät III Unv.-ro. Dr. Jan Franke-Vebach Exam Internatona Macroeconomcs Wnter Semester (2 nd Exam erod) Avaabe tme: 60 mnutes Souton For your attenton: 1. The exam s made up o 8 pages (ncudng ths cover page). ease check and see the exam you are hodng s compete. 2. For your answers, use the desgnated spaces. Shoud these not suce, use the backsde o the pages. ease do not use a penc. 3. Addtona materas you may use or the exam: a non-programmabe cacuator. (Smart phones and mobe phones are not aowed!) 4. ATTENTION: The names or varabes have the same meanng as n the ecture. Insoar as you aso use the same symbos or the varabes as we dd n the ecture you w not have to dene these any urther. Queston Sum Mark onts achevabe onts acheved

2 Unv.-ro. Dr. J. Franke-Vebach 2 robem 1: The Monetary Approach to the Exchange Rate wth Stcky rces a) The oowng equatons descrbe the ong-run equbrum: = e. =. M L(Y, =. ) ease verbay anayse the ong-run eect o a decrease o the oregn nterest rate ( ) on the nomna exchange rate (e ). [Instead o a verba anayss, you may use an arrow scheme.] [9 ponts] Souton: - domestc nterest rate as (or: as) - demand or rea baances rses (or: L rses) - excess demand on money market (or: L > M/ ) (1) - decreases - e decreases

3 Unv.-ro. Dr. J. Franke-Vebach 3 b) The short-run equbrum s ormazed by the oowng equatons: M L(Y, =. ) =. M = L( Y,). e = +. e We want to anayse the short-run eects o the decrease o the oregn nterest rate. [17 ponts] () How does the short-run prce eve () react? [2 ponts] Souton: no change () How does the rea quantty o money ( M ) change? [2 ponts] Souton: no change () How does the rea money demand (L) change? [2 ponts] Souton: no change (v) How does the nterest react? [2 ponts] Souton: no change

4 Unv.-ro. Dr. J. Franke-Vebach 4 (v) How does the expected percentage change o the exchange rate react? [2 ponts] E e Remember: e = e Souton: ncreases e e (v) How does the rato between the expected exchange rate and the current rate ( E(e ) / e) change? [2 ponts] Souton: ncreases (v) How does the short-run exchange rate (e ) change? ease deduce ths reacton rom your answer to (v) and rom the change o the expected rate E (e). [5 ponts] Souton: - as the ong-run exchange rate (e ) as, E(e ) decreases (1) (1) - n order to generate the ncrease o E(e)/e rom (v), e must a even more than E(e) (1) (1) (1)

5 Unv.-ro. Dr. J. Franke-Vebach 5 robem 2: ortoo-baance Approach to the Exchange Rate We are gven the equbrum condtons or the money market and or the market or oregn assets:, M = m ( ) (M + B + e F),, e F = ( ) (M + B + e F). + a) ease vsuaze the equbrum curves o the two markets n the oowng graph (denote them by M and by F, respectvey): [3 ponts] e Souton: e M (0.5) 1 1 F (0.5)

6 Unv.-ro. Dr. J. Franke-Vebach 6 b) Say we observe an exogenous ncrease n the stock o domestc bonds (B ). A other exogenous varabes reman constant. b 1 Does tota weath (W = M + B + e F ) ncrease or decrease? [1 pont] Souton: ncrease (1) b 2 Eects on the money market: [4 ponts] () Does the money demand ncrease or decrease? Souton: ncrease (1) () W there be an excess demand or an excess suppy n the money market? Souton: excess demand (1) () Takng the exchange rate (e) as gven, does the nterest rate () have to rse or a n order to restore equbrum n the money market? Souton: ncrease b 3 Eects on the market or oregn assets [6 ponts] () Does the demand or oregn assets ncrease or decrease? Souton: ncrease (1) () W there be an excess demand or an excess suppy n the market o oregn assets? Souton: excess demand (2.5) () Takng the exchange rate (e) as gven, does the nterest rate () have to rse or a n order to restore equbrum n the market or oregn assets? Souton: ncrease (2.5)

7 Unv.-ro. Dr. J. Franke-Vebach 7 robem 3: Keynesan Mode o Interna and Externa Baance The oowng equatons descrbe an economy wth unempoyment and a exbe exchange rate (e). Exogenous varabes are ndcated by a bar ( ): (1) Y = C( Y ) + I( ) + G + TB ( Y, e, Y ), + + =, M L(Y, ) + (3) B = TB ( Y, e, Y ) + CFA (, ) + + = 0. c) ease gve a bre nterpretaton o each equaton (wthout gong nto the detas o the behavoura unctons, such as C(Y) ). [3 ponts] Souton: (1) Equbrum n the goods market (0.5) (0.5) Equbrum n the money market (0.5) (0.5) (3) Externa equbrum (or: equbrum n the orex market) (0.5) (0.5) d) The oowng graph vsuazes the mode. ease desgnate each curve by the number o the equaton that t ustrates (1),, (3). ease assume that capta movements are reatvey nterest eastc. [4 ponts] A Y

8 Unv.-ro. Dr. J. Franke-Vebach 8 Souton: (1.5) (1) (1) (3) (1.5) A Y e) In order to promote producton and empoyment, the domestc government subsdzes domestc goods, thereby decreasng the domestc prce eve ( ). ease anayse the eects o ths acton by way o an arrow scheme. [13 ponts] Souton: TB Y L CFA e (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1)