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Q. Use the II - XX framework in order to show graphically how inflation can be imported from abroad unless exchange rates are adjusted.
Answer: Suppose that the home economy is countenance with foreign inflation that is P* is rising. For a known price level at home that P fixed the increase in P* will lower E such that EP*/P is unchanged. This entail that the II and XX curves will shift descending in such a way that the distance between the original E and the final E will be equal to E _P*/P* that is revaluation of the currency.
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
critically evaluate Adam Smith''s theory of absolute advantage,outlining the assumptions necessary for the theory to hold in its purest form.what are the criticisms of this theory
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Q . Now the monopolist discovers that it will export as much as it likes of its steel at the world price of $5/ton. It will thus expand for- export production up to the point whe
Q. To answer the following question, please refer to the figure below. Concentrating only at the lower left quadrant, discuss the relationship between the U.S. real money supply a
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