OMO buy potential accommodating discount rate monetary policy reserve POLICY requirement EXPANSIONARY OMO sale discount rate MONETARY reserve requirement CONTRACTIONARY [ UNIT VI ] International Economics r in county X r in the U.S., relative to appreciation of demand for dollar country X the US$ relative denominated financial D$ capital outflow from to the X$ from assets country X OR (e1 e2) – capital inflow to the U.S. r in county X r in the U.S., relative to depreciation of country X demand for dollar the US$ relative capital inflow to country denominated financial D$ to the X$ from X OR assets (e1 e2) – capital outflow from the U.S. [Typical International Goods (Current Account) Question]: [HINT] If forced to use S$, it should respond to Goods questions are S$. ΔrGDP. [TRUTH] $ denominated goods become relatively more expensive » D$ X Appreciation of the $ relative [truth » S$] to the from e1 –e2 ( denominated goods become relatively less expensive) M X $ denominated goods become relatively less expensive » D$ Depreciation of the $ relative [truth » S$] to the from e1 –e2 ( denominated goods become relatively more expensive) M
MONETARY POLICY EXPANSIONARY OMO buy potential accommodating monetary policy discount rate reserve requirement CONTRACTIONARY OMO sale discount rate reserve requirement [ UNIT VI ] International Economics r in county X r in the U.S., relative to country X capital outflow from country X OR capital inflow to the U.S. demand for dollar denominated financial assets D$ appreciation of the US$ relative to the X$ from (e1 – e2) r in county X r in the U.S., relative to country X capital inflow to country X OR capital outflow from the U.S. demand for dollar denominated financial assets D$ depreciation of the US$ relative to the X$ from (e1 – e2) [Typical International Goods (Current Account) Question]: [HINT] If forced to use S$, it should respond to ΔrGDP. [TRUTH] Goods questions are S$. Appreciation of the $ relative to the from e1 –e2 $ denominated goods become relatively more expensive » D$ [truth » S$] ( denominated goods become relatively less expensive) X M Depreciation of the $ relative to the from e1 –e2 $ denominated goods become relatively less expensive » D$ [truth » S$] ( denominated goods become relatively more expensive) X M