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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 purchasing domestic assets the central bank cause an initial excess supply of domestic money that concurrently pushed the domestic interest rate downward and weakens the currency. Though under fixed exchange rate the central bank will oppose any tendency of the currency to depreciate by selling foreign assets for domestic money and consequently removing the initial excess supply of money its policy move has caused.
Concept of human capital
Q. Economic theory in general and trade theory in particular are replete with equivalencies. For illustration, it is argued that for any specific tariff one can search an equival
HOW TERMS OF TRADE IS DETERMINED
Q. Using the II - XX framework, show using a figure that fiscal policies by themselves cannot bring the economy to both internal and external balances. Answer: Starting at poi
roles of international trade in economic growth of the country
Q. Explain why under the gold standard a perpetual surplus or a perpetual deficit is impossible. Answer: Since specie inflows drive up domestic prices and restore symmetry in
Q. Discuss the effects of government deficits on the current account. Answer: A difficult and hard issue that during the Reagan administration the creation of twin deficits whe
If one were to use the simple monetary model to predict the $/Euro exchange rate (L is constant), what would the expected exchange rate be?
theory of opportunity cost?
"Although the price levels appear to display short-run stickiness in many countries, a change in the money supply creates immediate demand and cost pressures that eventually lead t
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