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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.
Q. Explain why the exchange rate model based on PPP is a long-run theory. Answer: PPP theory is a financial approach to the exchange rate. It is a long-run theory for
Explanation with critical appraisal
"1. Describe the important benefits enjoyed by Indian companies through TRIPs. Elaborate the main objectives of WTO in global economy. 2. "Leontiff paradox is proved in th
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Q. "Fixed exchange rates are not even an option for most countries." Discuss. Answer: Durable fixed exchange rate arrangements may possibly not even be possible unless c
Q. Explain what a "vehicle currency" is. Why is the U.S. dollar considered a vehicle currency? Answer: A vehicle currency is one specifically widely used to denominate inter
Q. Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. Answer: Expected p
1. Explain Pierre Bourdieu's concepts of field, habitus, doxa, and symbolic violence. How do these concepts clarify the continued dominance of neoclassical analysis in mainstream e
what are the limitation of comparative advantage?
Assess the supply and demand of international reserves. Discuss the major determinants of the demand for international reserves: 1.) the monetary value of international transaction
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