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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. Economic theory in general and trade theory in particular are replete with equivalencies. For illustration, it is argued that for any specific tariff one can search an equival
Explain the classical theory of employment with relaxed assumption?
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Q. Discuss the values of private saving in closed and open economies. Answer: In the closed economy private saving Sp is equal to I + (G - T) and in an open economy private sav
explained with example
Q. Discuss the main factors affecting the position of the DD schedule. Answer: The level of government taxes, demand, and investment and the domestic and foreign price
Q. A naïve implication of the DD - AA framework is that either fiscal or monetary policy can lead to full employment. Discuss why this view is naïve. Answer: 1. Inflation m
Q. Why is it that an industry is performing under conditions of domestic internal scale economies (applies to firm in the country) - then the resultant equilibrium can't be consis
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