1, In below table provide the impact of each of the Change in Determinants down the side on 4 of the Outcome

Indicators across the top, leaving out the Outcome Indicator for which you are least sure of the impact. For all
except exchange rate use Rise or Fall as answers. For exchange rate use App or Dep as ansewers

Real GDP Inflation Unemployment Interest Rate Exchange

Rate
(flexible)

Higher Domestic Minimum Wage F R R F D IF FA ST

Rise in Price of Domestic Input F R R F D IF FA ST

Cut in Taxes on Domestic Businesses R F F R A IF FA ST

Cut in Taxes on Domestic Consumers R R F R A IF FA ST

Foreign Economic Crisis R R F DEPENDS A IF FA ST

Better Foreign Technology F F R F D

2. For each of the Change in Determinants in Question 1 provide 1 market in which it initially impacts; there
may be more than 1 for some.1. LABOR 2. PRODUCT 3. PRODUCT 4. PRODUCT 5. INTL AND
PRODUCT 6. INTL AND PRODUCT

3. For each of following combinations of Outcome Indicator results, provide 1 Change in Determinant that
could have caused it.
a. Real GDP up, BOP toward surplus in pegged exchange rate STRONGER FOREIGN ECONOMIES;
WOULD SHIFT D IN INTERNATIONAL MARKET TO RIGHT AND AD IN PRODUCT MARKET
TO RIGHT
b. Interest Rate down, Unemployment up FINANCIAL CRISIS; WOULD SHIFT GDP DOWN, D FOR
LABOR DOWN, UNEMPLOYMENT UP, D FOR MONEY DOWN AND INTEREST RATE DOWN
c. Inflation down, Unemployment up COULD BE ADVANCE IN DOMESTIC TECHNOLOGY WHICH,
WHILE RAISING GDP CAUSING SUBSTITUTION OF OUT LABOR

4. True or False.
a. Sustained Overall Balance of Payments surpluses and deficits most often occur with Pegged Exchange
Rates.T
b. A budget surplus lowers government debt.T
c. Appreciation benefits producers in the country for which the appreciation occurs.F
d. Unemployment and Real GDP cannot move at the same time in the same direction.F

5. Below are initial outcome situations in the 4 markets. Show new outcome situations – i.e. shift the curves and draw
new equilibriums – for an increase in immigration. Assume Pegged Exchange Rate.
Product Labor Financial International (Pegged XR)

AS SHIFTS RIGHT S SHIFTS RIGHT D SHIFTS RIGHT D SHIFTS RIGHT, S LEFT, XR SAME