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Q. Explain why under fixed exchange rate, monetary policy is ineffective whereas under floating exchange rate it is effective in rising output. Answer: In floating by purchasi
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. Discusses the effects of a rise in the interest rate paid by euro deposits on the exchanger rate. Answer: For a known U.S. interest rate and a given expectation wi
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
difference between differencial treatment in reverse andspecial and differencial treatment
Q. It is probable that trade based on external scale economies can leave a country worse off than it could have been without trade. Illustrate how this could happen. Answer:
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Q. "The H.O. model remains useful as a way to predict the income distribution effects of trade." Discus s. Answer: The Stolper-Samuelson theorem, one of the basic theorems ari
Q. In 1986, the price of oil on world markets dropped sharply. Since the United States is an oil-importing country, this was widely regarded as good for the U.S. economy. Yet in
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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