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Q. Explain how an increase in government spending would affect the DD-AA schedule in the short run.
Answer: A raise in government spending will raise aggregate demand, which will shift the DD to the right. If AA leftovers unchanged the new equilibrium will be at a higher Y and lower E. Ever since E is the nominal exchange rate a lower E is an appreciation of the currency.
Q . Use the following table to demonstrate the significance of macroeconomic policy coordination. Demonstrate that the two governments would have been happier if the two of them h
Q. How can long-run values in the real exchange rate change? Answer: A elevate in world relative demand for U.S output origins a long-run real appreciation of the dollar
Q. What is the Fisher Effect? Provide an example. Answer: All moreover equal a rise in a country's expected inflation rate will ultimately cause an equal rise in the i
Explain Purchasing Power Parity. Answer: PPP ( ) states that the exchange rate between two countries' currencies equals the ratio of the countries' price levels. A decr
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Q. The following table introduces the relationship between wholesale price index and industrial production changes between the years 1929 - 1935. What is the purpose of the given
Q. Discuss the main factors affecting the position of the DD schedule. Answer: The level of government taxes, demand, and investment and the domestic and foreign price
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