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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
Using the Heckscher-Ohlin model, discuss how the differences in supply and demand conditions between countries create a basis for trade.
trade experience of developing countries
THE SETTING Country X is blessed with large reserves of natural resources, spectacular physical landscape and a moderate climate. It is inhabited by a well educated and industrious
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
The Arguments for Flexible Exchange Rates
Suppose that industry 1 is monopolistically competitive, with a CES sub-utility function: U(c1,c2 ) = c1? + c?2 , 0 We let the marginal costs be denoted by c1(w,r), and the fixe
Q. What prompted the EU countries to seek closer coordination of monetary policies and greater exchange rate stability in the late 1960s? Answer: 1. To improve Europe's role
Q. Imagine a world with two large countries, Home and Foreign. Evaluate how Home's macroeconomic policies affect Foreign. Compare the small and the large country cases; consider
Strategic groups "Strategic groups are organizations within an industry with similar strategic characteristics, following similar strategies or competing on similar bas
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