National saving minus investment equals the current account. Indicate whether the statement is true or false ANSWER TRUE
Date: September 10th, 2020
Present and explain the Fundamental Equation of the Monetary Approach. What will be an ideal response? ANSWER Assume = PUS/PE and that domestic price levels depend on domestic money demands and supplies: PUS = MUSS/L(R$, YUS) PE = MES/L( , YE) Therefore, the exchange rate is fully determined in the long run by the […]
Date: September 10th, 2020
Explain the purpose of the following figure. What will be an ideal response? ANSWER To show that spot and forward exchange rates are in general close to each other.
Date: September 10th, 2020
Working conditions for clothing workers in Bangladesh are very poor. If countries refuse to buy clothing from Bangladesh in order to encourage change, the effect is likely to be that A) firms will be forced to comply and workers will be better off. B) firms will refuse to comply, but workers will be better off. […]
Date: September 10th, 2020
The Baker Plan for addressing the debt crisis was based on the assumption that A) most countries would eventually default on their debt. B) forgiveness of some of the debt was inevitable. C) renewed lending by U.S. and European banks would undermine push for economic reforms. D) hyperinflation would eventually reduce the real value of […]
Date: September 10th, 2020
Explain risk and liquidity of assets. What will be an ideal response? ANSWER Risk is the variability an asset contributes to a savers’ wealth. An asset’s real return can be unpredictable and savers dislike this uncertainty if the return fluctuates widely. Liquidity refers to the ease with which an asset can be sold or […]
Date: September 10th, 2020
We know that in antiquity, China exported silk because no one in any other country knew how to produce this product. From this information we know that A) China had a comparative advantage in silk. B) China had an absolute advantage, but not a comparative advantage in silk. C) no comparative advantage could exist because […]
Date: September 10th, 2020
The most important participants in foreign exchange markets are ________. Fill in the blank(s) with correct word ANSWER Commercial banks
Date: September 10th, 2020
If output more than doubles when all inputs are doubled, production is said to occur under conditions of A) increasing returns to scale. B) imperfect competition. C) intraindustry trade. D) interindustry trade. ANSWER A
Date: September 10th, 2020
Explain why exchange rate model based on PPP is a long run theory. What will be an ideal response? ANSWER PPP theory is a monetary approach to the exchange rate. It is a long-run theory because it does not allow for price rigidities. It assumes that prices can adjust right away to maintain full […]
Date: September 10th, 2020
