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Q. Suppose the relative price of good 1 falls relative to the price of. What happens to the wage rate?
Answer: The labour component of the price of 1 is bigger than that of product 2. Therefore a fall in the comparative price of 1 will lower the demand for labour and will result in a decrease in the wage rate.
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Q. "Even under flexible exchange rate regime, governments should not be indifferent to the behavior of inevitably and exchange rates surrendered some of their policy autonomy in o
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Q. The Heckscher-Ohlin model is famous for being elegant and mathematically sophisticated, yet failing to define reality. One manifestation of this fact is Trefler's Case of Missi
Q. What are the factors affecting the demand for foreign currency? Answer: Three factors that affect the demand for foreign currency are risk, expected return, and liquidity.
Q. Explain why in practice the extent to which a measured balance of payments disparity, either a surplus or a deficit, will affect home and foreign money supply is quite uncertain
Discuss the differences between Absolute PPP and Relative PPP . Answer: Absolute Purchasing Power Parity (PPP) states that the exchange rate between two currencies equals the
Q. The Specific Factors model makes a distinction between general-purpose factors that can move between sectors and factors that are specific to particular uses. How do difference
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