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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. It can be demonstrated that any protectionist policy, which effectively shifts real resources to import competing sector or industry, will harm export industries or sectors. T
Although the elegance and comprehensiveness of transactions costs reasoning has provided the internalisation approach with a powerful logic (Rugman, 1981, 1985), it is still defici
Postwar trade theory
The Source of Comparative Advantage can be understood as follows: The source of comparative advantage could be productivity differential (Ricardo) or differences in the factor
Q. How A Central Bank Fixes the Exchange Rate? Answer: The Central bank should always be willing to trade currencies at the fixed exchange rate with the private actors in the f
Question: Banks contribute to the economic development of a country. Banks have always been financing projects that help individuals and enterprises fulfill their plans. Howev
How do countries gain under the increasing cost assumptions
Q. Contrast the crisis in Poland and Russia. Explain why the Polish economy has done better? Answer: With the end of the 1990s a handful of East European economies including
Q. What is the interest parity condition? Answer: The circumstance that the expected returns on deposits of any two currencies are equal when measured in the same currency is
HOW TERMS OF TRADE IS DETERMINED
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