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Q. Explain the purpose of the given figure?
Answer: To demonstrate that spot and forward exchange rates are in general close to each other.
Q. What is the national income identity for an open economy? Answer: Y = C + I + G + EX - IM.
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. Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. Answer: Expected p
HOW TERMS OF TRADE IS DETERMINED
Q. Using figures for both the short run and the long run, show the effects of a permanent increase in the U.S. money supply. Try to line up your figures to the short and long run
Q. Define countertrade. Discuss the different forms of countertrade? Counter trade means all types of foreign trade in which the sale of goods to another country is associated
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