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Explain the complexities in the annalysis of balance of payment equilibrium
Q. Explain the difference between the following two expressions: Y = C(Y d ) + I + G + CA(EP*/P, Y d ) and Y = C + I +G + CA Answer: The first expression corresponds to a
Q. What types of international transactions are recorded in the balance of payment accounts? Answer: Three kinds' transactions that involve exports and imports of goods and s
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
Question : Banks find it more profitable to lend money as the margin on lending is much higher than any other banking activity. However, banks have to assess credit risks and t
Explain why Relative PPP is useful when comparing countries that base their price levels on different product baskets. Answer: For instance If the U.S price level increase by
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What can explain the failure of relative PPP to hold in reality? Answer: Government procedures of the price level differ from country to country. One cause for these differe
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 e
habler oppurtunity cost
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