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Q. What are the main factors determining the aggregate money demand?
Answer: Three major factors: the price level, interest rate and real national income. A increase in the interest rate causes each individual in the economy to reduce her demand for money. If the price level increases, individual firms and households will spend more money than before. When actual national income (GNP) raises the demand for money will rise.
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Q. Calculate the effects of the fall in the relative price of good 2 on the income of the specific factors capital and land. Answer: For the reason that good 2 uses land, a f
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Q. In autarky, Country P was producing at point 5. With trade, could its production point be found above or below point 5? Explain why. What must happen in the K/L intensity ratio
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Question: a) With the help of illustrative and numerical examples explain fully the concepts of spatial and triangular parity and arbitrage in the context of foreign exchange.
Q. Why do we observe the Leontief paradox? Answer: There are several possible answers that they may be categorized into three groups. One would argue that the theory or model
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