Task:
Please provide a step by step explanation:
Q1. Assume last year's real GDP was $10,000 billion, this year's nominal GDP is $13,800 billion, and the GDP-deflator for this year is 110. What was the growth rate of real GDP?
Q2. "Under a fixed exchange rate system, expansionary monetary policy depletes foreign reserves at the central bank." Comment on this statement with the help of an IS-LM diagram.
Q3. Using demand and supply analysis to assist you, what are the effects on the exchange rate between the British pound and the Japanese yen from:
i. an increase in Japanese interest rates
ii. an increase in the price of British goods
iii. an increase in British interest rates.