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Q. Explain why the dollar of the United States became the postwar world's key currency.
Answer:
1. The untimely convertibility of the U.S dollar in 1945.
2. The special position of the dollar in the Bretton Woods system.
3. The potency of the American economy relative to the devastated economies of Europe and Japan.
4. Central banks logically found it advantageous to hold their international reserves in the form of interest-bearing dollar assets.
Q. Discuss the relationship between PPP and the Law of One Price. Answer: The law of one price is applies to individual commodities while Purchasing Power Parity appli
Q. Countries that are willing to tolerate an unusually high quantity of pollution relative to their supplies of other factors would leads to export "pollution-intensive" goods. D
Q. Explain why the EMS countries decided to fix their exchange rates against the German DM? Answer: In this manner the other EMS countries in effect imported the credi
Q. If trade were to open up between R and P, where could the world terms of trade locate in the figure above (somewhere on the PC/PF axis)? Could relative wages (w/r) in the two c
Q. Even though it is very clear in the context of the Specific Factors model that an expansion of international trade will make losers as well as winners, economists still claim t
Welfare Effects of Tariff can be understood as follows: It is important to understand what the welfare effects for the tariff are. While a tariff might seem desirable because i
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