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Q. How were the initial members of EMU chosen? How will new members be admitted? What is the structure of the complex of financial and political institutions that govern economic policy in the euro zone?
Answer: EU countries must persuade:
a) Small inflation rate no more than 1.5 percent over the average of the three EU member states with the lowest inflation.
b) A steady exchange rate within the ERM.
c) Public-sector shortage no much high than 3 percent of its GDP in general.
d) A public debt less than or approaching a reference level of 60 percent of its GDP.
Q. Discuss the relationship between PPP and the Law of One Price. Answer: The law of one price is applies to individual commodities while Purchasing Power Parity appli
Q. What is the purpose of the following figure? Answer: The use of the figure is to show the inflation convergence within the six original EMS members. The f
what are the limitation of comparative advantage?
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Q. Discuss studies based on the interest parity conditions. Answer: Generally the formula doesn't hold and isn't a good predictor of future devaluations. Even poorer it
Q. In autarky, Country P was producing at point 5. With trade, could its production point be found above or below point 5? Explain why. What must happen in the K/L intensity ratio
Q. Explain the following figure: Answer : The figure explicate how the money markets of two countries are linked through the foreign exchange market. The financial pol
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Q. Explain the following figure: Answer: The figure depict the effect of a permanent increase in the money supply starting from full employment equilibrium. Subsequent to the i
Q. What do you think about international? Answer: A prescribed procedure whereby a country is able to seek international legal authorization to temporarily stop paying i
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