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Q. Discuss the differences between Absolute PPP and Relative PPP.
Answer: Absolute Purchasing Power Parity (PPP) states that the exchange rate between two currencies equals the ratio of their price levels. Relative Purchasing Power Parity (PPP) affirms that the percentage change in the exchange rate between two currencies over a given period equals the dissimilarity between the price rises rates of those two currencies.
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Q. A naïve implication of the DD - AA framework is that either fiscal or monetary policy can lead to full employment. Discuss why this view is naïve. Answer: 1. Inflation m
Canadian consumers have 50 dollar in come this is eual to the gross domestic product. they spand 35 dollars on comuser goods (25 on canadian goods annd 10 on imports) they save 8
Q. Suppose the relative price of good 1 falls relative to the price of. What happens to the wage rate? Answer: The labour component of the price of 1 is bigger than that of p
Q. What are the factors that determine the amount of money an individual desires to hold? Answer: Three major factors that are first one the expected return the asset offers co
Q. Why do we observe the Leontief paradox? Answer: There are several possible answers that they may be categorized into three groups. One would argue that the theory or model
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Q. "The H.O. model remains useful as a way to predict the income distribution effects of trade." Discus s. Answer: The Stolper-Samuelson theorem, one of the basic theorems ari
Q. Discuss the relationship between PPP and the Law of One Price. Answer: The law of one price is applies to individual commodities while Purchasing Power Parity appli
Q. What are the main factors determining the aggregate money demand? Answer: Three major factors: the price level, interest rate and real national income. A increase i
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