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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
how trade lowers the costs of making computer peripherals such as mice and keyboards
Q. Discuss the differences between Absolute PPP and Relative PPP. Answer: Absolute Purchasing Power Parity (PPP) states that the exchange rate between two currencies e
Explain Theoretical and methodological aspects of international economic relations
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Q. Why is it useful to make a distinction between debt and equity instruments? Answer: Debt instruments such as bank deposits and bonds are repaid regardless of econo
Q. Explain the causes of the U.S. Savings and Loans crisis of the early 1980s. Answer: On the one hand permitting S&L to make a lot riskier loans for instance loans on co
Q. How can international trade in assets make both countries better off? Answer: By permitting them to reduce the riskiness of the return on their wealth and by allowin
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Q. How mobile is Europe's labor force? Answer: Differences in culture and language discourage labour movements between European countries. Differences in regional unempl
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