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Q. What are the main factors determining the aggregate money demand? Answer: Three major factors: the price level, interest rate and real national income. A increase i
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What will be the effects of an increase in real national income on the interest rate? Answer: An enhance in real national income will increase the interest rate. If investment
Q. Explain the effects of a permanent increase in the U.S. money supply in the short run and in the long run. Assume that the U.S. real national income is constant. A raise in
Q. Explain why Relative PPP is useful when comparing countries that base their price levels on different product baskets. Answer: For instance If the U.S price level increase
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Q. What is the interest parity condition? Answer: The circumstance that the expected returns on deposits of any two currencies are equal when measured in the same currency is
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