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Q. Is Europe an optimum currency area? Answer: Yes the area's economy is strongly integrated with its own: most EU members export as of 10 to 20 percent of their output
discuss the central economic problem facing this group of survivors.
Q. Explain why one can write the demand for money as follows: Md = P L (R, Y) Answer: The collective money demand is proportional to the price level. Imagine that every prices
Q. If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant, can it still keep the exchange rate fixed at E 0 ? An
Q. Explain why East Asian countries have done so well relative to South American countries. Answer: Generally the reasons are less moral hazard less government debt to forei
construct a production possibilities frontier that represents japan''s goal of producing both cars and housing. Assume the japanase economy is in a downtyrn and indicate with an Xt
Q. Explain the Law of One Price. Give an example. Answer: The law of one price affirms that in competitive markets free of transportation costs and trade barriers ide
Q. Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate. Answer: The major points are: A raise in the European money supply will re
illustrate the circular flow of income of an open economy and explain the effects of various injections and withdrawal in the circular flow?
Q. What is the policy of sterilization? Give an example. Answer: • Untainted foreign exchange intervention - policy by which central banks perform equal foreign
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