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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 applies to the general price level.
Proponents of Purchasing Power Parity argue that its validity in the long run does not require the law of one price to hold exactly. When goods and services provisionally become more expensive in one country than in others the demands for its currency and its products reduce pushing the exchange rate and domestic prices back in line with Purchasing Power Parity and vice versa.
Q. Discuss the values of private saving in closed and open economies. Answer: In the closed economy private saving Sp is equal to I + (G - T) and in an open economy private sav
why is international trade important for south Africa?.
#question.what is the baises for international trade.
What constitutes the basis for trade? What are the gains from trade in terms of production and consumption? Use theories and examples from a country of your choice.
Q. What factors lie behind capital inflows to the developing world? Answer: Several developing countries have received a lot of capital inflows that lead them to an
roles of international trade in economic growth of the country
Habrrler''s oppirtunity cost theory
Q. Why is it useful to make a distinction between debt and equity instruments? Answer: Debt instruments such as bank deposits and bonds are repaid regardless of econo
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
Q. Use the diagram below taken from Figure 4-4 to identify the pre-trade situation for Australia and Sri-Lanka. Where on the K/L axis will you search each of the two countries? W
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