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Q. Explain what a "vehicle currency" is. Why is the U.S. dollar considered a vehicle currency? Answer: A vehicle currency is one specifically widely used to denominate inter
what are the limitations of the net barter terms of trade?
Although the elegance and comprehensiveness of transactions costs reasoning has provided the internalisation approach with a powerful logic (Rugman, 1981, 1985), it is still defici
Q. Explain how a rise in real income affects aggregate demand. Answer: An increase in domestic real income Y leads to a rise in disposable income Yd. This increases
Q. Several argue that tariffs always hurt the imposing country's economic welfare, and are typically designed to shift resources from one part to another, protected or preferred o
Q. Why is it that an industry is performing under conditions of domestic internal scale economies (applies to firm in the country) - then the resultant equilibrium can't be consis
Q. Explain why in exchange rate-based stabilization plan may result in a real appreciation? Answer: annotation 8 gives three reasons: first, persistent inflation because of s
Q. What is the domino effect or contagion? Answer: The definition is the defencelessness of even seemingly healthy economies to crisis of confidence generated by events
Q. Use the fixed exchange rate DD - AA model to describe the economy's short-run equilibrium. Then, use the same figure to study an expansionary monetary policy. Show that the pol
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
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