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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
Q. Explain why the distinction between debt and equity finance is useful in analyzing the response of developing countries to unforeseen events such as recession or terms of trade
Q. Explain what a "vehicle currency" is. Why is the U.S. dollar considered a vehicle currency? Answer: A vehicle currency is one specifically widely used to denominate inter
what i deficit balance of payment.
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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
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Q. Consider the economy is initially consuming along the intertemporal budget constraint at point A, where no saving occurs. How does a fall in the real interest rate, r, and affe
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