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Q. Using the GG - LL framework, analyze the effect of Libya subsidizing the Pakistani Nuclear programs.
Answer: This will move the GG curve upward and to the left causing the two countries to trade more therefore reducing the minimum value for the two countries to cooperate under a fixed exchange rate regime.
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
Q. What is the Fisher Effect? Provide an example. Answer: All moreover equal a rise in a country's expected inflation rate will ultimately cause an equal rise in the i
Canadian consumers have 50 dollar in come this is eual to the gross domestic product. they spand 35 dollars on comuser goods (25 on canadian goods annd 10 on imports) they save 8
Q. A naïve implication of the DD - AA framework is that either fiscal or monetary policy can lead to full employment. Discuss why this view is naïve. Answer: 1. Inflation m
Q. What is the policy of sterilization? Give an example. Answer: • Untainted foreign exchange intervention - policy by which central banks perform equal foreign
Special and Differential treatment
Q. Using the AA - DD framework, compare the effects of a rise in real domestic money demand under flexible and under fixed exchange-rate regimes. Answer: Under floating an i
Q. What can one learn from the following figure? Answer: The figure shows the U.S. current account as well as net foreign wealth from 1977 until 1996. It illustrate that a
Q.. "A good cannot be both land- and labor-intensive." Discuss. Answer: In a two good or two factor models for instance the original Heckscher-Ohlin framework and the factor
Explain Integration of International Trade and Foreign Investment
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