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Application of defferential calculus in economics
Q. Explain how the timing of a balance of payment crisis is determined. Be careful to state all assumptions. Answer: The assumptions of the model are: Prices are el
Q. Using the AA - DD framework, compare the effects of a rise in real domestic money demand under flexible and under fixed exchange-rate regimes. Answer: Under floating an i
Q. Explain how a rise in real income affects aggregate demand. Answer: An increase in domestic real income Y leads to a rise in disposable income Yd. This increases
Q. To answer the following question, please refer to the figure below. Concentrating only at the lower right quadrant, discuss the effects of a change in U.S. expected inflation.
What is the role of foreign trade in an economic development of a country
Q. Why are prices of factors of production not equalized? Answer: Again this statement may not or may be argued to be true. On the other hand, the growth and large volume in
The Source of Comparative Advantage can be understood as follows: The source of comparative advantage could be productivity differential (Ricardo) or differences in the factor
Q. Explain why the distinction between debt and equity finance is useful in analyzing the response of developing countries to unforeseen events such as recession or terms of trade
Q. Use a figure to study the following question: Consider that the economy is at a point on the DD-AA schedule that is above both AA and DD, where both the asset and output markets
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