Economics

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

Suppose Russia’s inflation rate is 200% over one year but the inflatio

Suppose Russia’s inflation rate is 200% over one year but the inflation rate in Switzerland is only 2%. According to relative PPP, what should happen over the year to the Swiss franc’s exchange rate against the Russian ruble? What will be an ideal response?   ANSWER (Eruble/franc, t – Eruble/franc, t-1)/Eruble/franc, t-1 = 2 – […]

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Date: September 10th, 2020

Discuss the differences between Absolute PPP and Relative PPP. What w

Discuss the differences between Absolute PPP and Relative PPP. What will be an ideal response?   ANSWER Absolute PPP states that the exchange rate between two currencies equals the ratio of their price levels. Relative PPP states that the percentage change in the exchange rate between two currencies over a given period equals the difference […]

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Date: September 10th, 2020

If the goods’ money prices do not change, a depreciation of the dollar

If the goods’ money prices do not change, a depreciation of the dollar against the pound A) makes British sweaters cheaper in terms of American jeans. B) makes British sweaters more expensive in terms of American jeans. C) makes American jeans more expensive in terms of British sweaters. D) doesn’t change the relative price of […]

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Date: September 10th, 2020

Discuss the relationship between PPP and the Law of One Price. What w

Discuss the relationship between PPP and the Law of One Price. What will be an ideal response?   ANSWER The law of one price applies to individual commodities while PPP applies to the general price level. Proponents of PPP argue that its validity in the long run doesn’t require the law of one price to […]

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Date: September 10th, 2020

One reason that a large share of the trade between high-income industr

One reason that a large share of the trade between high-income industrial economies is intraindustry trade is because A) it is more advantageous than interindustry trade. B) high-income industrial economies produce in the first stage of the product cycle. C) high-income industrial economies are wealthier than developing countries. D) high-income industrial economies have dissimilar resource […]

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Date: September 10th, 2020