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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. How could the U.S. government justify its decision to offer a subsidy to a profitable and successful business? Answer: It could indicate that this $10 million pump-priming
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
is the stolper samulson theorem is relevant in these days
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Although the elegance and comprehensiveness of transactions costs reasoning has provided the internalisation approach with a powerful logic (Rugman, 1981, 1985), it is still defici
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(a) Consider there are two countries (country 1 and country 2) with two goods (X and Y). Further, under the assumptions of the Ricardian model, country 1 specialise in goods X. De
Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. Answer: Expected pric
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