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Q. Consider the economy is initially consuming along the intertemporal budget constraint at point A, where no saving occurs. How does a fall in the real interest rate, r, and affect present consumption?
Answer: A diminishes in the real interest rate r causes the budget line to rotate counterclockwise about point A diminish the slope and causing a rise in present consumption.
Q. What is the policy of sterilization? Give an example. Answer: • Untainted foreign exchange intervention - policy by which central banks perform equal foreign
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Q. Why do governments prefer to avoid excessive current account surpluses? Or, why are growing domestic claims to foreign wealth ever a problem? Answer: On behalf of a given l
Q. "Even under flexible exchange rate regime, governments should not be indifferent to the behavior of inevitably and exchange rates surrendered some of their policy autonomy in o
heberler''s theory of opportunity cost notes
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Q. "The balance of payments is always balanced." Discuss. Answer: True each international transaction automatically enters the balance of payments twice once as a debit and o
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
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