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Q. Calculate the effects of the fall in the relative price of good 2 on the income of the specific factors capital and land. Answer: For the reason that good 2 uses land, a f
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Q. What will be the effects of an increase in the money supply on the interest rate? Answer: An enhance in the money supply will origins the interest rate to decrease. This m
Q. Suppose Russia's inflation rate is 200% over one year, but the inflation rate in Switzerland is only 2%. According to relative PPP, what should happen over the year to the Swis
Q. Explain why a London Eurobank has a competitive advantage over a bank in New York in attracting dollar deposits. Answer: It is able to pay more because the London ba
Q. Now, consider that the relative price of A is actually not higher than Albania's autarkic level of 1, but quite the opposite (e.g. PA/PB = 0.5). Could Albania still be able t
Q . Consider that the relative capital abundance of Australia was so much greater than that of Sri-Lanka, that we would have to locate Australia far to the right on the K/L axis.
Q. An export subsidy has the reverse effect on terms of trade to the effect of an import tariff. Domestically a tariff will raise the price of the import good, deteriorating the
Q. Explain the purpose of the given figure? Answer: To demonstrate that spot and forward exchange rates are in general close to each other.
Q. It has been argued that economic dualism that typifies relatively less developed or poor countries, is a barrier to participation in the global village, and lessens the chances
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