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Q. Why do governments prefer to avoid current account deficits that are too large?
Answer: A current account debit may possibly pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future. Though sometimes large current account deficits represent temporarily high consumption resulting from misguided government policies or some other malfunctioning of the economy occasionally the investment projects that draw on foreign funds may be badly planned and so on. In such cases the government strength wish to reduce the current account deficit immediately rather than face problems in repaying its foreign debt in the future.
Q. Explain why price levels are lower in poorer countries. Answer: One theory explicate the difference in prices on different endowments of capital and employment Bhagw
distinguish between net terms of trade and gross terms of trade
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Q. Use the diagram below taken from Figure 4-4 to identify the pre-trade situation for Australia and Sri-Lanka. Where on the K/L axis will you search each of the two countries? W
what is meant by country specific advantage?
Q. What explains the nearly universal scope of the Great Depression? Answer: The international gold typical played a central role in starting deepening and spreading the Great
Using examples, from the government, illustrate the significant opportunity cost.
Q. Why is the H.O. model called the factor-proportion theory? Answer: The H.O. model survey the limitations and the nature of presumptuous that the sole determinant of compar
In the Ricardian analysis, why does each trading partner have an incentive to produce at an endpoint of its production-possibility frontier? Why are prices of factors of production
Q. What are the predictions of the PPP theory with regard to the real exchange rates? Answer: The real exchange rate among two countries is a broad summary measure of
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