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Q. What are the three main reasons why governments sometimes chose to devalue their currencies?
Answer:
1. Permit the government to fight domestic unemployment despite the lack of effective monetary policy.
2. Get better the current account.
3. Raise foreign reserves held by the central bank.
Q. Using the diagram, show what happens to the composition of production (that is quantity of cloth per 1 unit of food) in Australia once trade is established between the two coun
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Q. What do you expect would be the effects of 9/11 on the size of the Eurocurrency markets? Answer: Will increase because of fear that foreign deposits in the United States wi
definitions;types
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 East Asian countries have done so well relative to South American countries. Answer: Generally the reasons are less moral hazard less government debt to forei
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
Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate. Answer: The major points are: A raise in the European money supply will reduc
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