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Illustration of reciprocal demand through example
Q. Explain how an increase in government spending would affect the DD-AA schedule in the short run. Answer: A raise in government spending will raise aggregate demand, which wi
Q. Suppose the relative price of good 1 falls relative to the price of. What happens to the wage rate? Answer: The labour component of the price of 1 is bigger than that of p
Q. One of the usually used assumptions in deriving the Heckscher-Ohlin model is that tastes are homothetic, or that if the per capita incomes were the similar in two countries, th
Discuss the exceptional supply curve
Q. Explain Tobin's idea of "Don't put all your eggs in one basket." Answer: The idea of diversification advanced with Tobin in his Attitude Towards Risk as well as Por
Q. Using the DD - AA framework, show the phenomenon of overshooting. Use a figure to explain when it is taking place. Answer: The figure below illustrates the phenomenon of ov
what are the basis of international business.
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
Q. It is claimed that the persistence of protectionism is often the result of the fact that those who lose from trade are usually a much more informed, cohesive and motivated a gr
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