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Q. What is the theory of Second Best? Answer: The principal of the second best notify us that when an economy suffers from multiple distortions the removal of only a few
habler oppurtunity cost
(a) Consider there are two countries (country 1 and country 2) with two goods (X and Y). Further, under the assumptions of the Ricardian model, country 1 specialise in goods X. De
Q. One of the usually used assumptions in deriving the Heckscher-Ohlin model is that tastes are homothetic, or that if the per capita incomes were the similar in two countries, th
Q. Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate. Answer: The major points are: A raise in the European money supply will re
tion..What is the range of gross barter terms of trade ?
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
Q. Present the case against floating exchange rates. Answer: 1.The discipline obligatory on individual countries by a fixed rate would be lost. 2. Undermine specu
What are the government's fiscal policy options for a recessionary gap caused by cost-push inflation? Use the aggregate demand-aggregate supply model to show the impact of these p
Theory of reciprocal demand
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