Economics

Why is it important to understand fixed exchange rates in the modern g

Why is it important to understand fixed exchange rates in the modern global economy? What will be an ideal response?   ANSWER Fixed rates continue to be important for four reasons: 1. Managed floating: Central banks intervene in foreign exchange markets. 2. Regional currency arrangements: Some countries peg their currency to another currency. 3. Developing […]

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Date: September 10th, 2020

Raul Prebisch was an Argentine economist who argued that A) the terms

Raul Prebisch was an Argentine economist who argued that A) the terms of trade would decline for primary commodity exports. B) the terms of trade would decline for manufactured goods exports. C) imports substitution policies were a solution to export pessimism. D) Both A and C. E) Both B and C.   ANSWER D

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Date: September 10th, 2020

Explain why Relative PPP is useful when comparing countries that base

Explain why Relative PPP is useful when comparing countries that base their price levels on different product baskets. What will be an ideal response?   ANSWER For Example: If the U.S. price level rises by 10% over a year while Europe’s rises by only 5%, relative PPP predicts a 5% depreciation of the dollar against […]

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Date: September 10th, 2020

In the year 2012, Shinzo Abe became prime minister of Japan, promising

In the year 2012, Shinzo Abe became prime minister of Japan, promising bold policies to improve Japan’s economy. What was the focus of his policies and how did they affect Japan’s trade position? What will be an ideal response?   ANSWER What has been called “Abenomics” involved monetary policies designed to reduce the value of […]

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Date: September 10th, 2020

Describe the technology transfer benefit of capital flows and the poli

Describe the technology transfer benefit of capital flows and the political power cost of large capital flows into low-income countries. What will be an ideal response?   ANSWER Benefits include new technologies, new management techniques, and new ideas. Developing countries often lack access to these without outside help. If it comes as direct investment, it […]

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Date: September 10th, 2020

MacDougall showed in his tests that A) relatively higher U.S. labor p

MacDougall showed in his tests that A) relatively higher U.S. labor productivity was associated with relatively higher U.K. export ratios. B) relatively higher U.K. labor productivity was associated with relatively higher U.K. export ratios. C) labor productivity ratios and export ratios were not associated with each other. D) None of the above.   ANSWER B

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Date: September 10th, 2020