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Q. What do you mean by Capital Flows?
With free capital flows, this is a very unreasonable assumption. If we domestic interest rate increase against the foreign interest rates, capital will flow into our country that would drive down the domestic interest rate again.
Most reasonable models in that domestic interest rate is affected by foreign interest rates are more complicated. To understand such models, you should first understand models where this complication doesn't arise. Additionally predictions from models where domestic interest rate isn't affected by foreign interest rates are fairly similar to more realistic models which allows for capital flows.
Q. What do you mean by Exchange rate? Exchange rate is defined as the price of one unit of currency in terms of another currency. If one euro costs 1.5 USD then 1 USD costs 1/1
Equilibrium Income The next step is to use the aggregate demand function, AD, to determine the equilibrium level of income and output. This is done in figure . Recall that the
Gross Domestic Savings Income not devoted to current consumption is saved. In an economy during a particular year some units will consume less than their income while some wil
Scope of Economics
Q. Money market with inflation and rising money supply? Figure: The money market with inflation and rising money supply If we let π M refer the growth rate in money
How to get the Euler equation?
The annual fixed cost for a light fixture manufacturing company are $38,000, and the variable costs are $40 per unit. If the selling price per unit is p = 485 - 1.395X, what is the
What is the opportunity cost of economic growth? Opportunity cost measures the cost of an economic option within terms of the next best option foregone. The government of a
Q. Why GDP is determined only by aggregate demand? Note that we haven't said anything about the aggregate supply so far. In order to justify why GDP is determined only by aggre
Typical start-up businesses' estimated profit are forecasted as following: State Bad Good Probability 81% 21%
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