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Countries are indulged in trade because there are mutual gains from trade. But then, what are these gains which they obtain, and how are these realized? Comparative advantage theory provides the answers to such questions. The theory says that countries will gain by specializing in it and then exporting the good they have a comparative advantage or lower opportunity of the cost advantage in.
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
Q. What are the main factors determining the aggregate money demand? Answer: Three major factors: the price level, interest rate and real national income. A increase i
HOW TERMS OF TRADE IS DETERMINED
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
Road,railway,air and shlping transportation
Explain how the money markets of two countries are linked through the foreign exchange market. Answer: The financial policy actions by the Fed affect the U.S. interest rate al
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Q. Explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates. Answer: Using the GG - LL framework
Q. Explain why under fixed exchange rate, monetary policy is ineffective whereas under floating exchange rate it is effective in rising output. Answer: In floating by purchasi
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