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Q. Discusses the effects of a rise in the interest rate paid by euro deposits on the exchanger rate. Answer: For a known U.S. interest rate and a given expectation wi
ndian harm sector export
Q. 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
What can explain the failure of relative PPP to hold in reality? Answer: Government procedures of the price level differ from country to country. One cause for these differe
what is was the weakest model
Q. How and why did Europe set up its single currency? Answer: The why part of the question is associated to large fluctuations in the exchange rates between the Europe
Q. How did the European single currency evolve? Answer: The answer is related to the crumple of Bretton Woods and the European Currency reform of 1969-1978. The Werner
Q. Explain why the European Union's current combination of rapid capital migration with limited labor migration may actually raise the cost of adjusting to product market shocks wi
Q. Explain Tobin's idea of "Don't put all your eggs in one basket." Answer: The idea of diversification advanced with Tobin in his Attitude Towards Risk as well as Por
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
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