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1. Explain what would be the effect on the dollar/euro exchange rate if economic growth increased in the EMU but not in the United States.
2. Explain what would be the effect on the dollar/euro exchange rate if the price level increased less in the United States than in the European Monetary Union (EMU).
3. Explain what would happen to the dollar/euro exchange rate if the interest rate increased in the United States but remained unchanged in the European Monetary Union (EMU).
4. (a) What is the absolute purchasing-power parity theory? Why is this not acceptable?(b) What is the relative purchasing-power parity theory? When do we expect it to hold?(c) Do empirical tests confirm or reject the relative purchasing-power parity theory?
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The important Occupancy Ratio is computed
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price quantity demanded quantity supplied300 500 1800270 600 1.700240 700 1600210 800 1500180 1000 1400150 1100 1300120
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