Global Macroeconomics Policies Exam

GLOBAL
MACROECONOMICS
POLICIES EXAM

Table of Contents
Question: 1.......................................................................................................................................3
How would the change in the preferences of overseas consumer affect the economy of each
economy by using the aggregated demand and aggregated supply............................................3
Question: 5.......................................................................................................................................4
What does the elasticities model of devaluation predict the impact of sterling’s devaluation
on the UK’s Current Account balance........................................................................................4
REFERENCES................................................................................................................................5

Question: 1
How would the change in the preferences of overseas consumer affect the economy of each
economy by using the aggregated demand and aggregated supply.
There are two countries A and B and the country A's goods are less popular with foreign
consumer and the other B's commodities are more population. A country is having their own
currency and B country is sharing common currency with their foreign customers. Desirability
of currency union is defined as the merging of the currencies and sharing the common
currencies which leads to reduce the transactions costs in an increasing integrated regional
market(Jordehi, 2019). There are various factors which are necessary fro the currency union is
stability of government, effective fiscal positions and the exchange rate stability and the overall
convergence of long-term interest rates. Taste and preferences of the customers are the choices
which can be varied over a specific period of time. It is being measured by certain bundles of
goods. They also permits the buyers to rank such goods as their level of utility as received by the
consumer. As the Country A is having their own currency and their goods are less popular in the
foreign market. In such cases, there is the problem of having the major impact that exchange in
the currency tends to have the lower demand of goods in the foreign market as the people who
are living in the foreign market are more happy to share the overall goods which are easy to buy
and also having the same value of currency of that products in comparison to other currency in
which the foreign guest is residential. This is the reason why the country B's good are more
popular as they are sharing the same currency with the other countries , where the people are
making purchase from the B country. This leads to increase the demand of goods in the target
market as they are contributing to the factors which re leading to rise the overall demand of
goods in target market. These aspects make the desirability of currency union among the
countries by which they can increase its sale in the foreign market which also leads to have more
profits to them. Then their goods become more popular in the foreign market(Gurumurthy And
et. al., 2020).