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Q. Explain why one can write the demand for money as follows: Md = P L (R, Y) Answer: The collective money demand is proportional to the price level. Imagine that every prices
Q. International trade leads to complete equalization of factor prices. Discuss. Answer : This statement is usually "true...but". Under a limited and strict set of assumpti
Q. Suppose Russia's inflation rate is 200% over one year, but the inflation rate in Switzerland is only 2%. According to relative PPP, what should happen over the year to the Swis
Q. If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant, can it still keep the exchange rate fixed at E 0 ? An
Q. It is impossible for economic growth in a small country to lower that country's economic welfare, regardless of the bias of the growth. Explain. Answer: This is a true st
Q. The two deadweight triangles are the Production distortion and Consumption distortion losses. It is simple to understand why the Consumption distortion constitutes a loss for
Q. Using 4 different figures, plot the time paths showing the effects of a permanent increase in the United States money supply on: A. U.S. money supply. B.
Q. Presumably, since the United States is a large country in many of its international markets, a positive optimum tariff exists for this country. It follows thus that when any l
Q. To answer the following question, please refer to the figure below. Concentrating only at the lower right quadrant, discuss the effects of a change in U.S. expected inflation.
Q. What are the main lessons economists learned from the developing country crisis? Answer: 1. select the right exchange rate regime. 2. The central significance of
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