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Q. What is a country risk index? Explain the categories classified by business environment risk information The country risk index tries to incorporate the economic , geographi
Explain why Relative PPP is useful when comparing countries that base their price levels on different product baskets. Answer: For instance If the U.S price level increase by
what is the free trade
Q. Albania refused to engage in international trade for ideological reasons. To maximize its economic welfare it could choose to produce at which point in the diagram above? Sup
What are the two main base of foreign trade ?
Q. The 1980s are considered as the "lost decade" of Latin American growth. Explain why? Answer: Whilst the Great Depression made it hard for developing countries to make pa
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. Illustrate why when Norway unilaterally fixes its exchange rate against the euro but leaves the krone free to float against the non-euro currencies, it is unable to keep at leas
Q. What do you expect would be the effects of 9/11 on the size of the Eurocurrency markets? Answer: Will increase because of fear that foreign deposits in the United States wi
Q. Discuss the effects of ongoing inflation based on the PPP theory. Answer: Other things equivalent money supply growth at a constant rate eventually results in ongoi
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