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Q. Based on the case study, answer the following question: Can currency boards make fixed exchange rates credible? Answer: No for the reason that is prohibited by law from a
Q. What are the main lessons economists learned from the developing country crisis? Answer: 1. select the right exchange rate regime. 2. The central significance of
Q. What do you think about dollarization? Answer: The respond is almost certainly a bad idea unless in the very short run. It must talk about the loss of seigniorage a
Q. Explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates. Answer: Using the GG - LL framework
Q. The 1980s are considered as the "lost decade" of Latin American growth. Explain why? Answer: Whilst the Great Depression made it hard for developing countries to make pa
What is the role of foreign trade in an economic development of a country
Q. 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
Discuss the differences between Absolute PPP and Relative PPP . Answer: Absolute Purchasing Power Parity (PPP) states that the exchange rate between two currencies equals the
Q. One reason international trade has a powerful effect on the distribution of income within countries is that some factors are "specific", and therefore cannot move costlessly fr
Q. Present the case against floating exchange rates. Answer: 1.The discipline obligatory on individual countries by a fixed rate would be lost. 2. Undermine specu
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