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Q. "The balance of payments is always balanced." Discuss.
Answer: True each international transaction automatically enters the balance of payments twice once as a debit and once as a credit.
Current account + financial account + capital account = 0
Q. Explain how an increase in government spending would affect the DD-AA schedule in the short run. Answer: A raise in government spending will raise aggregate demand, which wi
Annotated Bibliography
Q. What is the policy of sterilization? Give an example. Answer: • Untainted foreign exchange intervention - policy by which central banks perform equal foreign
Explain why the exchange rate model based on PPP is a long-run theory. Answer: PPP theory is a financial approach to the exchange rate. It is a long-run theory for the reason
why do nations impose trade barriers
Q. What is a country risk index? Explain the categories classified by business environment risk information The country risk index tries to incorporate the economic , geographi
Explain Purchasing Power Parity. Answer: PPP ( ) states that the exchange rate between two countries' currencies equals the ratio of the countries' price levels. A decr
The recessionary gap in a country is $1 trillion. The spending multiplier is 5. For every $50 billion borrowed, interest rates increase by 0.1 %. For every 0.1% increase in interes
The East Asian financial crisis
Q. The United States, as it began its long and unbeaten growth in the early 19th Century, consciously promoted domestic production through such activities as tariffs, Clay's Ameri
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