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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.
Q. Use the II - XX framework in order to show graphically how inflation can be imported from abroad unless exchange rates are adjusted. Answer: Suppose that the home economy is
Q. Suppose the relative price of good 1 falls relative to the price of. What happens to the wage rate? Answer: The labour component of the price of 1 is bigger than that of p
Q. In the year 2000, Americans flocked to Paris. What economic forces made French goods seem so cheap to residents of the United States? Answer: One main factor was a sharp f
Q. Use the diagram below taken from Figure 4-4 to identify the pre-trade situation for Australia and Sri-Lanka. Where on the K/L axis will you search each of the two countries? W
Q. Using a figure illustrate the simultaneous equilibrium of the foreign exchange and domestic money markets when the exchange rate is fixed at E0 and is expected to remain fixed a
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.
what is the criticism of opportunity cost
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