Suppose that the price level relevant for money demand includes the price of imported goods and that the price of imported goods depends on the exchange rate. That is, the money market is described by: M/P= L(r, Y) where P= λPD + (1+ λ)PF/e

The parameter λ is the share of domestic goods in the price index P. Assume that the price of domestic goods PD and the price of foreign goods measured in foreign currency PF are fixed.

a. Suppose we graph the LM curve for given values of PD and PF (instead of the usual P). Is this LM curve still vertical? Explain.
b. What is the effect of expansionary fiscal policy under floating exchange rates in this model? Explain. Contrast with the standard Mundell-Fleming model.
c. Suppose that political instability increases the country risk premium and, thereby, the interest rate. What is the effect on the exchange rate, the price level, and aggregate income in this model? Contrast with the standard Mundell-Fleming model.

Why should you not sign the tenant landlord agreement quickly and immediately

Vulcan flyovers offers scenic overflights of mount st. helens, the volcano in washington state that explosively erupted in 1982. data concerning the company’s operations in july appear below: vulcan flyovers operating data for the month ended july 31 actual results flexible budget planning budget flights (q) 56 56 54 revenue ($350.00q) $ 16,500 $ 19,600 $ 18,900 expenses: wages and salaries ($3,300 + $91.00q) 8,354 8,396 8,214 fuel ($31.00q) 1,904 1,736 1,674 airport fees ($870 + $35.00q) 2,730 2,830 2,760 aircraft depreciation ($11.00q) 616 616 594 office expenses ($240 + $1.00q) 464 296 294 total expense 14,068 13,874 13,536 net operating income $ 2,432 $ 5,726 $ 5,364 the company measures its activity in terms of flights. customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount. required: 1. prepare a flexible budget performance report for july that includes revenue and spending variances and activity variances.

Which of the following is the term for something that you can't live without 1. need 2. want 3. good 4. service