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Q. Using a figure, show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run.
Answer: A temporarily monetary expansion will move the economy from DD1 to DD2 and output increases. A permanent financial expansion will as well shift the AA curve to the left and down. The small exchange rate appreciates that is E decreases.
Q. What do you think about dollarization? Answer: The respond is almost certainly a bad idea unless in the very short run. It must talk about the loss of seigniorage a
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Q. It can be argued that Japan's explicit promotion of its microchip industry was an excellent paradigm of successful industrial policy. What criteria could you apply to calculat
Q. Explain why East Asian countries have done so well relative to South American countries. Answer: Generally the reasons are less moral hazard less government debt to forei
Q. "Although the price levels appear to display short-run stickiness in many countries, a change in the money supply creates immediate demand and cost pressures that eventually lea
explain the source of foreign capital
Does the existence of non-tradable goods allow for deviations from Purchasing Power Parity? Answer: Yes the continuation of non-tradable goods permits deviations from Purchas
distinguish between net terms of trade and gross terms of trade
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