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Q. What are the predictions of the PPP theory with regard to the real exchange rates? Answer: The real exchange rate among two countries is a broad summary measure of
Q. Using the diagram, show what happens to the composition of production (that is quantity of cloth per 1 unit of food) in Australia once trade is established between the two coun
Using the Heckscher-Ohlin model, discuss how the differences in supply and demand conditions between countries create a basis for trade.
Postwar trade theory
Question: a) With the help of illustrative and numerical examples explain fully the concepts of spatial and triangular parity and arbitrage in the context of foreign exchange.
critically evaluate Adam Smith''s theory of absolute advantage,outlining the assumptions necessary for the theory to hold in its purest form.what are the criticisms of this theory
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. "Although the price levels appear to display short-run stickiness in many countries, a change in the money supply creates immediate demand and cost pressures that eventually lea
Q. Why do you suppose that South-South trade does not conform in volume, but does conform in pattern with expectations prepared by the Heckscher-Ohlin model? Answer: The patt
Assess the supply and demand of international reserves. Discuss the major determinants of the demand for international reserves: 1.) the monetary value of international transaction
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