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Q. Explain what a "vehicle currency" is. Why is the U.S. dollar considered a vehicle currency?
Answer: A vehicle currency is one specifically widely used to denominate international contracts made by parties who don't reside in the country that issues the vehicle currency. While 2001 ninety percent of foreign exchange transactions engross exchanges of foreign currencies for U.S. dollars so the dollar is considered a vehicle currency.
Q. Explain why the exchange rate model based on PPP is a long-run theory. Answer: PPP theory is a financial approach to the exchange rate. It is a long-run theory for
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In the Ricardian analysis, why does each trading partner have an incentive to produce at an endpoint of its production-possibility frontier? Why are prices of factors of production
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Q. How mobile is Europe's labor force? Answer: Differences in culture and language discourage labour movements between European countries. Differences in regional unempl
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Q. What types of international transactions are recorded in the balance of payment accounts? Answer: Three kinds' transactions that involve exports and imports of goods and s
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Discuss the differences between Absolute PPP and Relative PPP . Answer: Absolute Purchasing Power Parity (PPP) states that the exchange rate between two currencies equals the
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