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Q. Explain why under the gold standard a perpetual surplus or a perpetual deficit is impossible.
Answer: Since specie inflows drive up domestic prices and restore symmetry in the balance of payments any excess eventually eliminates itself. A shortage of currency direct to low domestic prices and a foreign payments surplus, and any deficit eventually eliminates itself.
Q. In autarky, Country P was producing at point 5. With trade, could its production point be found above or below point 5? Explain why. What must happen in the K/L intensity ratio
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Q. Using the GG - LL framework, analyze the effect of Libya subsidizing the Pakistani Nuclear programs. Answer: This will move the GG curve upward and to the left causi
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how is exchange rate determined?
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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