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Q. What are the predictions of the PPP theory with regard to the real exchange rates?
Answer: The real exchange rate among two countries is a broad summary measure of the prices of one country's goods and services relative to the other's. PPP predicts that the actual exchange rate never permanently changes which is different from nominal exchange rates that deal with the relative price of two currencies
Explain the classical theory of employment with relaxed assumption?
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Q. Suppose Airbus is set to give the aircraft before Boeing. Which company will enter the market? Answer: Boeing will not and Airbus will produce.
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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Question: a) With the help of illustrative and numerical examples explain fully the concepts of spatial and triangular parity and arbitrage in the context of foreign exchange.
Q. Discuss the effects of ongoing inflation based on the PPP theory. Answer: Other things equivalent money supply growth at a constant rate eventually results in ongoi
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