University of Georgia Behavioral Economics Problems

For each Change in Determinant provide how each Indicator will change

Given

# wage rate is fixed at above market equilibrium wage for both determinant changes;

# there is no concern over government debt default;

# international financial flows are sensitive to interest rate differentials;

# exchange rate is flexible for (a) and pegged for (b).

For Exchange Rate, use Appreciate (A), Depreciate (D), or No Change (NC) as answers;

for International Reserves use Rise (R), Fall (F), or No Change (NC) as answers;

for Government Debt, use Rise Faster (RF) or Rise Slower (RS) as answers;

for all other indicators, use Rise (R) or Fall (F) as answers

Change in Determinant

1. Increased outflows of portfolio capital

2. Increased Immigration

Indicators

1st Market Impact

1.

2.

RGDP

1.

2

Inflation

1.

2

Unemployment

1.

2

Interest Rate

1.

2.

Exchange Rate

1.

2

International Reserves

1.

2.