Factors Influencing Trade Balance in the U.S.A
UPDATE FROM THE CLIENT:
QUESTION FROM THE WRITER:"Discuss the factors influencing the trade balance for the US. There are three to discuss (ignore any J curve effects.
PLEASE clarify on that "there are three to discuss". Are the three from the document or I'm to research."
CLIENT'S REPLY: Both can be
Writers can write only the question E OR D (Discuss the factors influencing the trade balance for the US. There are three to discuss (ignore any J curve effects).)
HOMEWORK #8 (60 points total)
Economics 434 online
Don’t lose points - read these instructions carefully!
• Carefully answer each of the questions below.
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• If you typed everything:
o Save the file on your computer (.PDF format) and then upload it to the CANVAS dropbox for this homework assignment.
o Be sure your assignment is all on one file. Failure to submit a single file will result in points being deducted
• Pages must be scanned in proper order
1) (60 points total)
a) (15 points - 5 for each correct and completely labeled diagram) Suppose there are two countries, the US and Japan operating under a flexible exchange rate regime. Japan elects a new prime minister who convinces the Bank of Japan (BOJ) to pursue an expansionary monetary policy. Assuming the standard Keynesian assumptions show what happens to interest rates, output and the exchange rate in the US. To do so, use the following diagrams all pertaining to the US: Keynesian cross on the top left, the IS - LM diagram on the bottom left and the FX market on the bottom right. Label the initial point as point A and point B as the new equilibrium after the monetary expansion in Japan. As is customary, label the initial output (Y), interest rate (i), and nominal exchange rate (E) with a subscript 1, and the corresponding values after the monetary expansion in Japan with a subscript 2. Note again that we are modeling US economic variables, not those for Japan.
b) (10 points) Discuss the factors influencing the trade balance for the US. There are three to discuss (ignore any J curve effects).
c) (15 points - 5 for each correct and completely labeled diagram) Use the identical diagrams as you did for part a) but this time, instead of Japan increasing output via expansionary monetary policy, they increase output via expansionary fiscal policy (an increase in G). Using the customary labeling as above, locate points A and B.
d) (10 points) Discuss the factors influencing the trade balance for the US. There are three to discuss (ignore any J curve effects).
e) (10 points) How would your answers change to parts b) and d) above if we assume J curve effects?
Factors Influencing Trade Balance in the U.S.A
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Factors Influencing Trade Balance in the U.S.A
The trade balance is the difference between a country's export and import values for a specific period (Cheng, 2020). Balance of trade helps in a nation's balance of payment to ensure citizens have better living standards as the economy grows. Since the trade balance is the net export, it is impacted by all the factors that affect international trade (Cheng, 2020). Different factors such as trade policy, demand goods and services, and exchange rate influence the trade balance in the United States.
Trade policy in the United States will determine how other nations trade with the U.S. If the policies in place promote trade with other nations, then they will trade freely, which will promote trade balance and vice versa. Imposing sanctions on other nations means that there will be no trade between the nations, which leads to a trade imbalance (Cohen et al., 2019). Effective trade policies promote import and exports of goods which strength...