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Q. What are the three main reasons why governments sometimes chose to devalue their currencies? Answer: 1. Permit the government to fight domestic unemployment despite the
Q. Explain why after, say Norway unilaterally pegs the krone to the euro, domestic money market disturbances will no longer affect domestic output despite the continuation of float
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
How can we Rise of intraindustry trade
Q. Explain the purpose of the following figure. Show the effects of German unification on Germany's interest rate. Answer: The major purpose is to show that different i
Opportunity cost theory
Q. One of the usually used assumptions in deriving the Heckscher-Ohlin model is that tastes are homothetic, or that if the per capita incomes were the similar in two countries, th
Q. Explain why large interest rate differences would be strong evidence of unrealized gains from trade. Answer: The difference between offshore and onshore interest rates on
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
who looses from tarrif and quota?
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