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Q. What is the interest parity condition?
Answer: The circumstance that the expected returns on deposits of any two currencies are equal when measured in the same currency is called the interest parity condition. It involve that potential holders of foreign currency deposits view them as equally desirable assets that is risk is assumed away. In the notational forms:
R$ = RE + (Ee $/E - E$/E) / E$/E.
Q. There is frequently a conflict between short-term and long-term interests in trade. Discuss. Answer: In trade models that the short term is usually defined as that (conce
argument about fair distribution of income and gnp as a measurment of economic growth
Q. Suppose both governments offer their respective company a $10 million subsidy. Answer: Mutually companies would enter the market as each one knows that regardless of the o
Q. It is probable that trade based on external scale economies can leave a country worse off than it could have been without trade. Illustrate how this could happen. Answer:
Q. In recent cases, the U.S. placed quotas or protectionist tariffs on imported microchips and imported steel. In both cases the damage to "downstream" industries was obvious to
Q. Using a figure illustrate the simultaneous equilibrium of the foreign exchange and domestic money markets when the exchange rate is fixed at E0 and is expected to remain fixed a
what is this theroy
Q. Use a figure to study the following question: Consider that the economy is at a point on the DD-AA schedule that is above both AA and DD, where both the asset and output markets
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
the Trade and the Economy
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