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Opportunity cost theory
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
Q . Use the following table to demonstrate the significance of macroeconomic policy coordination. Demonstrate that the two governments would have been happier if the two of them h
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. How mobile is Europe's labor force? Answer: Differences in culture and language discourage labour movements between European countries. Differences in regional unempl
Q. "Bank failure may not be limited to banks that have mismanaged their assets." Explain why. Answer: A sound bank countenanced with the wholesale loss of deposits is likely to
Using the Heckscher-Ohlin model, discuss how the differences in supply and demand conditions between countries create a basis for trade.
Q. There is frequently a conflict between short-term and long-term interests in trade. Discuss. Answer: In trade models that the short term is usually defined as that (conce
Q. Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. Answer: Expected p
Q. What prompted the EU countries to seek closer coordination of monetary policies and greater exchange rate stability in the late 1960s? Answer: 1. To improve Europe's role
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