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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 the reason that it doesn't allow for price rigidities. It assumes that prices are able to adjust right away to maintain full employment as well as PPP.
International monetary system
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Q. "A monetary policy is not a policy tool under fixed exchange rates." Discuss. Answer: It is True Under fixed exchange rates domestic asset transactions by the centr
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