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Q. Explain how the AA schedule is derived.
Answer: For a fixed real money supply an enhancement in output leads to an increase in the domestic interest rate. In the foreign exchange market an enhancement in the domestic interest rate leads to a lower nominal exchange rate therefore appreciating the currency. Therefore the relationship among nominal exchange rate and output is negative this leads to a negative slope of the AA schedule which has the ostensible exchange rate and output on its axes.
Q. Explain the phenomenon of capital flight. Answer: The reserve defeat accompanying a devaluation scare is habitually labeled capital flight for the reason that the assoc
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Why Adam Smith theory cannot be applicable?
An International Regime for FDI and MNCs
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Q. Discuss studies based on the interest parity conditions. Answer: Generally the formula doesn't hold and isn't a good predictor of future devaluations. Even poorer it
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