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Describe the State and the Multinationals
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
WHAT ARE THE METHODS OF FDI
The Source of Comparative Advantage can be understood as follows: The source of comparative advantage could be productivity differential (Ricardo) or differences in the factor
Q. Suppose the relative price of good 1 falls relative to the price of. What happens to the wage rate? Answer: The labour component of the price of 1 is bigger than that of p
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
Q. Discuss the differences between Absolute PPP and Relative PPP. Answer: Absolute Purchasing Power Parity (PPP) states that the exchange rate between two currencies e
Q. What types of international transactions are recorded in the balance of payment accounts? Answer: Three kinds' transactions that involve exports and imports of goods and s
Q. Explain what a "vehicle currency" is. Why is the U.S. dollar considered a vehicle currency? Answer: A vehicle currency is one specifically widely used to denominate inter
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
Q. Explain how an increase in the real exchange rate affects exports and imports. Answer: While the real exchange rate rises domestic products are cheaper relative to
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