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Q. Explain why the European Union's current combination of rapid capital migration with limited labor migration may actually raise the cost of adjusting to product market shocks without exchange rate change.
Answer: If the Netherlands undergo an unfavourable shift in output demand Dutch capital is able to flee abroad leaving even more unemployed Dutch workers behind than in the case of government regulations that were to hinder the movement of capital outside the Netherlands. Harsh and persistent regional depressions could result worsened by the probability that the relatively few workers who did successfully emigrate would be precisely those who are most reliable, skilled, and enterprising. This is another instance of the theory of the second best.
Globalization The procedure of interlinking financial markets in various countries into a common, world pool of funds to be accessed by both between borrowers and lenders. It
Q. What is the national income identity for an open economy? Answer: Y = C + I + G + EX - IM.
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Q. How did countries use their policy tools to regain internal and external balance after the first oil shock of 1973? Answer: Seeing that the recession deepened over 1974 an
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