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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.
suppose that France has a trade surplus with the united kingdom, what would you expect to happen to price,wages, and commodity price in France? why? what would happen to the terms
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Q. Several argue that tariffs always hurt the imposing country's economic welfare, and are typically designed to shift resources from one part to another, protected or preferred o
2. If a country's growth is biased in favor of its import, this should unequivocally improve its terms of trade and its economic welfare. Discuss. Answer: Suppose the Japan
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The recessionary gap in a country is $1 trillion. The spending multiplier is 5. For every $50 billion borrowed, interest rates increase by 0.1 %. For every 0.1% increase in interes
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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
Q. Discuss studies based on the interest parity conditions. Answer: Generally the formula doesn't hold and isn't a good predictor of future devaluations. Even poorer it
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