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Q. Explain why even owners of capital that cannot be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is open to capital flows.
Answer: The major reason is through diversification. If Norway's capital market is incorporated with those of the EMU neighbours Norwegians will invest some of their wealth in other countries even as at the same time part of Norway's capital stock will be owned by foreigners.
Q. Using the AA - DD framework, compare the effects of a rise in real domestic money demand under flexible and under fixed exchange-rate regimes. Answer: Under floating an i
Q. Using the diagram, show what happens to the composition of production (that is quantity of cloth per 1 unit of food) in Australia once trade is established between the two coun
Q. Discuss the benefits and costs of joining a fixed-exchange area. Answer: Benefits generally gains from the stability of the area and reduced uncertainty. The compete
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