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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.
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
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Q. Explain Purchasing Power Parity. Answer: PPP () states that the exchange rate between two countries' currencies equals the ratio of the countries' price levels.
Q. Use the fixed exchange rate DD - AA model to describe the economy's short-run equilibrium. Then, use the same figure to study an expansionary monetary policy. Show that the pol
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
Q. Explain why after, say Norway unilaterally pegs the krone to the euro, domestic money market disturbances will no longer affect domestic output despite the continuation of float
1. Explain Pierre Bourdieu's concepts of field, habitus, doxa, and symbolic violence. How do these concepts clarify the continued dominance of neoclassical analysis in mainstream e
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Q. Describe the role of offshore banking and of offshore currency (eurocurrencies) trading. Answer : Both have mushroomed because of increased international trade inc
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