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Q. Using 4 different figures, plot the time paths showing the effects of a permanent increase in the United States money supply on: A. U.S. money supply. B.
Q. Use the II - XX framework in order to show graphically how inflation can be imported from abroad unless exchange rates are adjusted. Answer: Suppose that the home economy is
how to learn trade model
Q. Suppose both governments offer their respective company a $10 million subsidy. Answer: Mutually companies would enter the market as each one knows that regardless of the o
When asked by the Carnegie Commission to prepare a report on post war Preferential Trading Agreements, Viner (1950) pointed out that they are not free trade. He used the concepts o
Explain why Relative PPP is useful when comparing countries that base their price levels on different product baskets. Answer: For instance If the U.S price level increase by
Q. Explain how a rise in real income affects aggregate demand. Answer: An increase in domestic real income Y leads to a rise in disposable income Yd. This increases
Q. Albania refused to engage in international trade for ideological reasons. To maximize its economic welfare it could choose to produce at which point in the diagram above? Sup
Q. "No country is abundant in everything." Discuss. Answer: the idea of relative (country) factor abundance is (like factor intensities) a relative concept. When we recogniz
Q. Explain why large interest rate differences would be strong evidence of unrealized gains from trade. Answer: The difference between offshore and onshore interest rates on
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