Money and Finance
Networks, Organizations and Society. A range of theoretical perspectives have attempted to explain the development and application of different techno
June 24, 2020Mandatory Critical Reflections
June 24, 2020Money and Finance
Money and Finance
1. Consider a small open economy X that trades solely with a much larger open economy Y; in Y we can ignore any impact from X.
(a) Economy Y has a budget deficit which is financed by issuing bonds. What will be the effect on economy Y’s interest rate?
(b) Assuming the portfolio balance model is correct, what will be the effect of this foreign interest change on economy X? Draw all relevant diagrams, and explain the economics of what is going on.
