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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.
Using the Heckscher-Ohlin model, discuss how the differences in supply and demand conditions between countries create a basis for trade.
Q. Suppose the U.S. government (but not Europe) offers a $10 million subsidy? Answer: In this case Airbus would make a decision not to enter the market since it knows Boeing
Q. Explain why the EMS countries decided to fix their exchange rates against the German DM? Answer: In this manner the other EMS countries in effect imported the credi
describe this thery in detail?
Q. Explain why even owners of capital that cannot be moved can avoid more of the economic stability loss due to fixed exchange rates when Norway's economy is open to capital flows
Q. How can long-run values in the real exchange rate change? Answer: A elevate in world relative demand for U.S output origins a long-run real appreciation of the dollar
Q. What is the real exchange rate between the dollar and the euro equal to? Answer: Let actual dollar/euro exchange rate q$/ENominal exchange rate E$/EPrice of an unchan
Q. The 1980s are considered as the "lost decade" of Latin American growth. Explain why? Answer: Whilst the Great Depression made it hard for developing countries to make pa
2. If a country's growth is biased in favor of its import, this should unequivocally improve its terms of trade and its economic welfare. Discuss. Answer: Suppose the Japan
what are the alternative theories of trade?
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