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Q. If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant, can it still keep the exchange rate fixed at E0?
Answer: No this is for the reason that the domestic interest rate would begin to rise above R*. Traders in the foreign exchange market would start to bid up the price of domestic currency in terms of foreign currency. In the deficiency of central bank intervention the exchange rate thus would fall below E0 so as to prevent this appreciation the central bank should sell domestic currency and buy foreign assets thus increasing the money supply and preventing any excess money demand from pushing the home interest rate above R*.
what is this all about
Explain why the exchange rate model based on PPP is a long-run theory. Answer: PPP theory is a financial approach to the exchange rate. It is a long-run theory for the reason
Q. Suppose Airbus is set to give the aircraft before Boeing. Which company will enter the market? Answer: Boeing will not and Airbus will produce.
explained with example
Offer curves with example and explabation
Q. "The costs and benefits for a country from joining a fixed-exchange rate area such as the EMS depend on how well-integrated its economy is with those of its potential partners.
Q. The migration model of Todaro and Harris provided an important theoretical critique of the manufacturing-biased import-substitution trade-policy stance. Illustrate. Answer:
I need help interpreting an article. PLEASE!
Adjustment in international monetary system
economic theories to explain free traden..
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