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Q. 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 ratio of their price levels. Relative Purchasing Power Parity (PPP) affirms that the percentage change in the exchange rate between two currencies over a given period equals the dissimilarity between the price rises rates of those two currencies.
Q. Present the case against floating exchange rates. Answer: 1.The discipline obligatory on individual countries by a fixed rate would be lost. 2. Undermine specu
Q. "Under floating rates, the economy is more vulnerable to shocks coming from the domestic money market." Discuss. Answer: It is true statement, under floating rates an incr
Q. What can you learn from the figure below, which depicts the US GNP and its components for the year 1997? Answer: The U.S. GNP is about 8 trillion expenditure represents
Q. Explain the following figure: Answer: The figure depict the effect of a permanent increase in the money supply starting from full employment equilibrium. Subsequent to the i
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Explain Purchasing Power Parity. Answer: PPP ( ) states that the exchange rate between two countries' currencies equals the ratio of the countries' price levels. A decr
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