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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.
Q. Describe the chain of events leading to exchange rate determination for the following cases: 1. An increase in the U.S money supply 2. An increase in the growth rate of the
Q. How can international trade in assets make both countries better off? Answer: By permitting them to reduce the riskiness of the return on their wealth and by allowin
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By Using the figure describing both the U.S. money market and The foreign exchange market, analyze the effects of an increase in the U.S. money supply on the dollar or euro exchang
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Q. The figure below shows the demand and cost functions facing a Brazilian Steel producing monopolist. If it were unable to export, and was constrained by its domestic market, wh
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