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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. Why is it useful to make a distinction between debt and equity instruments? Answer: Debt instruments such as bank deposits and bonds are repaid regardless of econo
Q. What is the national income identity for a closed economy? Answer: Y = C + I + G.
Explain Theoretical and methodological aspects of international economic relations
Q. Explain why under the gold standard a perpetual surplus or a perpetual deficit is impossible. Answer: Since specie inflows drive up domestic prices and restore symmetry in
Q. Explain why in practice the extent to which a measured balance of payments disparity, either a surplus or a deficit, will affect home and foreign money supply is quite uncertain
Q. What prompted the EU countries to seek closer coordination of monetary policies and greater exchange rate stability in the late 1960s? Answer: 1. To improve Europe's role
Q. Analyze the effects of devaluation on an economy. Answer: Devaluation basis a rise in output a rise in official reserves and an expansion of the money supply. A private cap
explain various gains from international trade
Q. 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
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