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Q. Explain the credibility theory of the EMS.
Answer: In this approach the other EMS countries in effect imported the credibility of the German central bank in fighting inflation so discouraging the development of inflationary pressures at home. This is recognized as the credibility theory of the EMS.
Q. Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of a temporary increase in the European money supply on the dollar/euro
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Q. Explain why large interest rate differences would be strong evidence of unrealized gains from trade. Answer: The difference between offshore and onshore interest rates on
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Q. Discuss the values of private saving in closed and open economies. Answer: In the closed economy private saving Sp is equal to I + (G - T) and in an open economy private sav
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