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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.
Explain why Relative PPP is useful when comparing countries that base their price levels on different product baskets. Answer: For instance If the U.S price level increase by
Explain Ohlin theory of International trade
Q. What is the national income identity for a closed economy? Answer: Y = C + I + G.
Q. It is argued that import substitution is a misguided trade policy if the intent is to show long-term economic growth. Illustrate the reasons underlying this argument. Answe
Question : (a) What are the rationales for interest and currency swaps? (b) Suppose a Swiss firm, SandyCom Ltd, wants to invest in the U.S. The Swiss firm needs US dollars
briefly summaries the alternative explanation to the theory of international trade?
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Q. Use the fixed exchange rate DD - AA model to describe the economy's short-run equilibrium. Then, use the same figure to study an expansionary monetary policy. Show that the pol
Q. Describe the chain of events leading to exchange rate determination for the following cases: 1. An increase in the U.S money supply 2. An increase in the growth rate of the
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