This question considers long-run policies in Mexico relative to the US. Assume Mexico’s money growth rate is currently...

Get help with any kind of assignment - from a high school essay to a PhD dissertation

  1. Order Custom Essay, Course Work, Research and Term Papers

considers long-run policies in Mexico relative to the US

April 14, 2018

This question considers long-run policies in Mexico relative to the US. Assume Mexico’s money growth rate is currently 14% and its growth rate of real income is 2%. The US’s money growth rate is 6% and its growth rate of real income is 3.75%. The world real interest rate is 1.75%.

For the following questions, use the conditions associated with the general monetary model. Treat Mexico as the home country (define the exchange rate as Mexican pesos per US dollar).

a. Calculate the inflation rates in Mexico and the US.

b. Calculate the nominal interest rate in each country.

c. Calculate the expected rate of depreciation of the Mexican peso relative to the US dollar.

d. Suppose the Central Bank of Mexico increases the money growth rate from 14% to 19%. If nothing in the US changes, what is the new inflation rate in Mexico, and what is the new expected rate of depreciation of the Mexican peso relative to the US dollar?

e. Illustrate how the change in Mexico’s money growth rate affects the time paths of the following variables: MM , PM , Mexico’s real money supply, and E.

f. Suppose instead that the Mexico decreases the money growth rate from 14% to 9%. If nothing in the US changes, what is the new inflation rate in Mexico, and what is the new expected rate of depreciation of the Mexican peso relative to the US dollar?

g. Suppose the Central Bank of Mexico wants to implement a policy that would cause the Mexican peso to appreciate relative to the US dollar. What range of the money growth rate would achieve this objective? What range of values does this imply for Mexico’s inflation rate?

i. Suppose that Mexico’s central bank wants to maintain a fixed exchange rate against the US dollar. Assuming that nothing in the US changes, what must the central bank do to achieve this objective? What money growth rate for Mexico will make a fixed exchange rate feasible? Explain. j. Calculate Mexico’s new inflation rate and nominal interest rate after this policy is implemented.

k. Suppose Mexico’s growth rate of real income increases from 2% to 4%. If Mexico wants to maintain the fixed exchange rate with the US dollar, how must it change its policy?

l. Now suppose that the US’s inflation rate increases by 1.5 percentage points. If Mexico wants to maintain the fixed exchange rate, what will happen to its inflation rate? What is the necessary change in Mexico’s money supply growth rate?











OUR SERVICE CHARTER






  • 100% Confidentiality

    We mind about the interests of our clients holistically. It is for this reason that we maintain high-level confidentiality in regard to our clients’ personal information. Importantly, we use the information for purposes that relate with our services only. The only information that we require relates to our clients’ writing needs. It is also important to note that our clients’ payment information is secure with us. If there is any query in regard to the payment information, then our support team is always willing to provide any clarifications in a prompt manner. Confidentiality extends to the fact that a client made use of our services. It means that we hold our relationship with our clients in secrecy. Importantly, our confidentiality measures beat any advanced security measure that can identify any information regarding our relationship with our clients. It means that our clients transact with us freely without any fear of information leakage.

  • Money Back Guarantee

    If any of our writers deliver an incomplete or ambiguous paper that is off the topic, our clients can claim for a refund in regard to the oversight. We do not compromise our service delivery through submission of a paper that does not follow our clients’ instructions. We also mind about the interest of our customers, and we always give them value for their money. However, our clients have a choice to request for a free revision within 14-30 days, or depending on the length of the submitted paper. A client who needs a refund should send a request for it within 14 days after receiving the completed paper. If a client decides not to download the paper, then they can request for 100% refund. Any refunded amount usually goes to the client’s Bonus Balance as store credit. There is always extra compensation when the refund takes the form of store credit. Alternatively, the refunded amount can also go the client’s credit card.

  • Professional Academic Writers

    An academic degree is one of the qualifications that our writers hold. This is only a minimum requirement that we ask from our writers, but the team also has writers who possess higher educational credentials. It means that the team comprises of competent writers who have gone through institutions of higher learning and passed their exams. Subsequently, the writers have a good grasp of what our clients require. It is notable that our writers not only want to apply their acquired knowledge, but they are also willing to help our clients to outperform them. This is a clear indication of a team that is willing to walk an extra mile. We uphold professionalism in our operations, and our clients should look forward to receive services from a team of experts. It is the spirit of value addition that makes us to scale any heights in order to deliver and outperform our clients’ expectations.

  • 24/7 Customer Support

    Our team of writers prides in high-level competence. The writers have the required expertise that enables them to deliver quality papers that match with the requirements of the grading rubric. In the absence of the rubric, we ensure that the writers follow the clients’ instruction brief to the letter. We can confidently assure our clients to expect nothing short of a pass from the papers that we deliver. Importantly, we have qualified writers who handle different areas of study. This diversification enables us to allot clients’ orders to the writer who is well seasoned in the subject area of study. It also enables the team to become more professional due to specialization. Our clients should put their trust in our service delivery and expect to successfully attain high grades at all times. The fact that we offer free revision reflects our dedication in delivering high quality papers that match with our clients’ expectations.




Related Questions