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Q. Explain why the exchange rate model based on PPP is a long-run theory.
Answer: PPP theory is a financial approach to the exchange rate. It is a long-run theory for the reason that it doesn't allow for price rigidities. It assumes that prices are able to adjust right away to maintain full employment as well as PPP.
suppose that France has a trade surplus with the united kingdom, what would you expect to happen to price,wages, and commodity price in France? why? what would happen to the terms
Assignment of labor economics
In the Ricardian analysis, why does each trading partner have an incentive to produce at an endpoint of its production-possibility frontier? Why are prices of factors of production
Assume the United States exports 1000 computers at a price of $3000 each and imports 15 UK autos at a price of 10000 pounds each. Assume that the dollar/pound exchange rate is $2 p
What does the factor proportions theory posits
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discuss the superiority of haberler''s theory of opportuinity cost over mill''s theory reciprocal demand?
Criticism against Hechscher-Ohlin type trade theories is explained below: The foremost criticism leveled against Hechscher-Ohlin type trade theories are that they views compara
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