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(a) Consider there are two countries (country 1 and country 2) with two goods (X and Y). Further, under the assumptions of the Ricardian model, country 1 specialise in goods X. De
Q. Suppose Albania is exporting product B, and experienced economic growth biased in favor of product B as seen in the Figure above. We are also told that Albania's new consumptio
The latest economic investigations report that the recent earthquake, tsunami and nuclear disaster have led to an economic recession in Japan. This recession may reduce the demand
Q. Is Europe an optimum currency area? Answer: Yes the area's economy is strongly integrated with its own: most EU members export as of 10 to 20 percent of their output
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
Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. Answer: Expected pric
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 by
Q. Why is the H.O. model called the factor-proportion theory? Answer: The H.O. model survey the limitations and the nature of presumptuous that the sole determinant of compar
Q. Contrast the crisis in Poland and Russia. Explain why the Polish economy has done better? Answer: With the end of the 1990s a handful of East European economies including
Q. What is the national income identity for a closed economy? Answer: Y = C + I + G.
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