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Q. What are the three main reasons why governments sometimes chose to devalue their currencies?
Answer:
1. Permit the government to fight domestic unemployment despite the lack of effective monetary policy.
2. Get better the current account.
3. Raise foreign reserves held by the central bank.
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Q. 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
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