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Q. Explain the issues involved with the Fed acting as a lender of Last Resort (LLR).
Answer: On the one hand LLR make possible the Fed to avoid panic and disturbance to proper functioning of financial markets. On the other hand using the policy may possibly cause problems of moral hazard.
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Q. Other things being equal, a rise in a country's terms of trade enhances its welfare. What could happen if we relax the ceteris paribus assumption, and allow for the law of dema
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