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Q. Explain how an increase in government spending would affect the DD-AA schedule in the short run.
Answer: A raise in government spending will raise aggregate demand, which will shift the DD to the right. If AA leftovers unchanged the new equilibrium will be at a higher Y and lower E. Ever since E is the nominal exchange rate a lower E is an appreciation of the currency.
Q. Why are prices of factors of production not equalized? Answer: Again this statement may not or may be argued to be true. On the other hand, the growth and large volume in
Q. Countries do not in fact export the goods the H.O. theory predicts. Discuss. Answer: This statement isn't true that though one may find several cases where it seems to be
Q. Explain Critical Appraisal of Chamberlins theory? a. Chamberlin assumed that monopolist competitors act independently and their price manicuring goes unnoticed by the rival
ABOUT THIS THEORY
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Q. What is the national income identity for an open economy? Answer: Y = C + I + G + EX - IM.
Q. Use the DD - AA model to examine and compare the response of an economy under fixed and floating exchange-rate regimes to a temporary fall in foreign demand for its exports.
what are the limitations of net barter terms of trade
The law of reciprocal demand is different from the reciprocal demand curve?
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