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Q. Why do governments prefer to avoid current account deficits that are too large?
Answer: A current account debit may possibly pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future. Though sometimes large current account deficits represent temporarily high consumption resulting from misguided government policies or some other malfunctioning of the economy occasionally the investment projects that draw on foreign funds may be badly planned and so on. In such cases the government strength wish to reduce the current account deficit immediately rather than face problems in repaying its foreign debt in the future.
Road,railway,air and shlping transportation
Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. Answer: Expected pric
Q. Use a figure to study the effects of a change in market belief with regard to the fixed exchange rate, in particular assume market participants expect the government to devaluat
what are the theories supporting protectionism
Countries are indulged in trade because there are mutual gains from trade. But then, what are these gains which they obtain, and how are these realized? Comparative advantage theor
Q. Economic theory in general and trade theory in particular are replete with equivalencies. For illustration, it is argued that for any specific tariff one can search an equival
Q. What is the Fisher Effect? Provide an example. Answer: All moreover equal a rise in a country's expected inflation rate will ultimately cause an equal rise in the i
The external economic environment could have implications for the project in various areas. There is no tax in Saudi Arabia; this is a significant political effect on the projec
Q.. "A good cannot be both land- and labor-intensive." Discuss. Answer: In a two good or two factor models for instance the original Heckscher-Ohlin framework and the factor
Q. Use the II - XX framework in order to show graphically how inflation can be imported from abroad unless exchange rates are adjusted. Answer: Suppose that the home economy is
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