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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. If trade were to open up between R and P, where could the world terms of trade locate in the figure above (somewhere on the PC/PF axis)? Could relative wages (w/r) in the two c
breadtalk
Q. Why do we observe the Leontief paradox? Answer: There are several possible answers that they may be categorized into three groups. One would argue that the theory or model
Q. Why did the Fed step in to organize a rescue for Long Term Capital Management (LTCM) in September 1998, rather than simply letting the trouble fund fail? Was the Fed's action
Q. Compare currency board to conventional fixed exchange rate? Answer: Currency board mayn't acquire domestic assets and therefore cannot lend currency freely to domesti
Are tariffs harmful are necessary to maintain fair trade?
Q. Analyze the effects of devaluation on an economy. Answer: Devaluation basis a rise in output a rise in official reserves and an expansion of the money supply. A private cap
Q . While selling exports it could also maximize its domestic sales by equating its marginal (opportunity) cost to its marginal revenue of $5. How much steel could the firm sell
een subject to a discrimination complaint as a result of their recent recruitment campaign- They told the recruitment agency that they were looking for ‘young women with flair'' to
Criticism against Hechscher-Ohlin type trade theories is explained below: The foremost criticism leveled against Hechscher-Ohlin type trade theories are that they views compara
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