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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.
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Q. Describe the effects of the Smoot-Hawley tariff imposed by the United States in 1930. Answer: It had a damaging consequence on employment abroad. The foreign response occu
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Q. Present and explain the Fundamental Equation of the Monetary Approach. Answer: Suppose E$/E = PUS/PE and that domestic price levels depend on domestic money demand
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