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Q. "Even under flexible exchange rate regime, governments should not be indifferent to the behavior of inevitably and exchange rates surrendered some of their policy autonomy in o
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
2. If a country's growth is biased in favor of its import, this should unequivocally improve its terms of trade and its economic welfare. Discuss. Answer: Suppose the Japan
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
Q. What will be the effects of an increase in the money supply on the interest rate? Answer: An enhance in the money supply will origins the interest rate to decrease. This m
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
what is opportunity cost
Q. What are the three main reasons why governments sometimes chose to devalue their currencies? Answer: 1. Permit the government to fight domestic unemployment despite the
Q. Why are prices of factors of production not equalized? Answer: Again this statement may not or may be argued to be true. On the other hand, the growth and large volume in
Q. Describe the role of offshore banking and of offshore currency (eurocurrencies) trading. Answer : Both have mushroomed because of increased international trade inc
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