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Q. Using an equation, explain why governments prefer to avoid excessive current account surpluses.
Answer: This pursue from the national income identity S = CA + I which says that total domestic savings S is divided among foreign asset accumulation CA and domestic investment I.
Lot of
Q. Explain Purchasing Power Parity. Answer: PPP () states that the exchange rate between two countries' currencies equals the ratio of the countries' price levels.
Q. What are the three types of gains from international transactions between the residents of different countries? Answer: 1. Gains due to comparative benefit and ec
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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. Now, consider that the relative price of A is actually not higher than Albania's autarkic level of 1, but quite the opposite (e.g. PA/PB = 0.5). Could Albania still be able t
1. Explain why many Asian countries set up Export Processing Zones and why China set up Special Economic Zones. What are the similarities and differences between EPZs and SEZs?
Q. Discuss the main factors affecting the position of the DD schedule. Answer: The level of government taxes, demand, and investment and the domestic and foreign price
Q. Explain why under the gold standard a perpetual surplus or a perpetual deficit is impossible. Answer: Since specie inflows drive up domestic prices and restore symmetry in
Why Adam Smith theory cannot be applicable?
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