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What are the principal services provided by your local government? How much of benefits accrue to strictly local residents, and how much to visitors and others?
Is structure of state and local government where you live highly centralized compared to other states? How would you measure the degree of centralization?
Illustrate how each of the following scenarios affects the home country. Compare the outcomes when the home country has a fixed exchange rate with the outcomes.
Consider how transactions costs affect foreign currency exchange. Rank each of the following foreign exchanges according to their probable spread.
Describe how you could use an options contract to hedge against the risk of losses associated with the potential appreciation in the U.S. dollar.
If uncovered interest parity (UIP) holds, what is the expected depreciation of the euro (against the pound) over one year?
Describe how investors use arbitrage to take advantage of the difference in exchange rates.
Why does the government have the ability to intervene in this way, while private actors do not?
Compare and contrast each problem as it applies to monetary policy stabilization versus fiscal policy stabilization.
Assume forex market equilibrium is given by i = ([1/E] -1) + 0.10. What is the expected future exchange rate?
In which case or cases will the government response be the same as in the previous question?
How would a decrease in the money supply of Paraguay affect its own output and its exchange rate with Brazil (currency unit is the real).
For each of the following situations, use the ISLM-FX model to illustrate the effects of the shock. Investors expect a depreciation of the home currency.
How will this increase in investment affect output, interest rates, and the current account?
If policy makers are concerned about the current account deficit, discuss whether stimulatory fiscal policy or monetary policy makes more sense in this case.
Two more states of world appear: Armageddon (A) and Utopia (U). Why does diversification eliminate consumption risk in each case? Explain.
If the country still desires to smooth consumption looking forward from year 1, how much should it borrow in period 1?
If the country desires to smooth consumption, how much should it borrow in period 0? What will the new level of consumption be from then on?
For each of the following shocks, explain how and to what extent each country can trade capital to better smooth consumption.
Some EU countries are keen to exclude Turkey from the EU. What might be the economic arguments for that position?
What will Turkey's capital per worker level k be? Label this outcome point T2 in each diagram. Will Turkey converge to the EU level of q? Explain.
Can A be the same in Brazil as in the United States? If not, compute the level of A for Brazil. What is Brazil's MPK relative to the United States?
How would you depict this shift for a pair of countries in the symmetry-integration diagram that started off just below the FIX line in 1870?
Discuss the debate between states' rights versus centralized authority in the context of the Economic and Monetary Union and the European Central Bank.
The Maastricht Treaty places strict requirements on government budgets and national debt. Why do you think the Maastricht Treaty called for fiscal discipline?