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Q. Explain the difference between the following two expressions: Y = C(Y d ) + I + G + CA(EP*/P, Y d ) and Y = C + I +G + CA Answer: The first expression corresponds to a
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Q. Explain the Law of One Price. Give an example. Answer: The law of one price affirms that in competitive markets free of transportation costs and trade barriers ide
Q. Explain why, according to Feldstein and Horioka, one should expect that domestic investment rates diverge widely from saving rates. Answer: The decisions of corporations t
Q. Explain the advantage a and disadvantage of globalization? Advantages - 1. Economic growth 2. Lower cost 3. Improved availability of goods and services 4. Glob
Q. What is the theory of Second Best? Answer: The principal of the second best notify us that when an economy suffers from multiple distortions the removal of only a few
Present and explain the Fundamental Equation of the Monetary Approach. Answer: Suppose E $ /E = P US /P E and that domestic price levels depend on domestic money demands and
Q. Explain why a London Eurobank has a competitive advantage over a bank in New York in attracting dollar deposits. Answer: It is able to pay more because the London ba
Q. Analyze the effects of devaluation on an economy. Answer: Devaluation basis a rise in output a rise in official reserves and an expansion of the money supply. A private cap
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