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Q. Suppose both governments offer their respective company a $10 million subsidy. Answer: Mutually companies would enter the market as each one knows that regardless of the o
Q. Explain why under fixed exchange rate, monetary policy is ineffective whereas under floating exchange rate it is effective in rising output. Answer: In floating by purchasi
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Q. "Under floating rates, the economy is more vulnerable to shocks coming from the domestic money market." Discuss. Answer: It is true statement, under floating rates an incr
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