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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 increase in real domestic money demand causes income to fall and domestic currency to appreciate. If the increase in real domestic money supply is permanent it will lead ultimately to a fall in the home price level.
Under a fixed exchange rate the variation in real money demand doesn't affect the economy at all. To protect the home currency from appreciating the central bank buys foreign reserves with domestic money until the real money supply go up by an amount equal to the rise in real money demand. This intervention has the consequence of preventing any change in output or the price level.
Q. Use the DD - AA model to examine and compare the response of an economy under fixed and floating exchange-rate regimes to a temporary fall in foreign demand for its exports.
You will submit a report that shows your investigation of your focus question. Your report must be 1500 - 2000 words in length written for the journal Health Australia, a journal
Difference between net barter terms of trade and gross barter terms of trade
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. Explain Purchasing Power Parity. Answer: PPP () states that the exchange rate between two countries' currencies equals the ratio of the countries' price levels.
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Q. Compare currency board to conventional fixed exchange rate? Answer: Currency board mayn't acquire domestic assets and therefore cannot lend currency freely to domesti
Hepburn’s Speed Model, the coefficients of vehicles are indicated for C and D. As the chief of operations in your organization, you are responsible for presenting the yearly budget
Q. Factor-intensity reversals define a situation in which the production of a product can be land-intensive in one country, and relatively labor intensive in another ( at given re
Q. Explain why it may make sense for the United States, Japan, and Europe to allow their mutual exchange rate to float? Answer: Even though these regions trade amid each other
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