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q discuss the main factors affecting the position of the aa scheduleanswer revolutionize in the domestic money supply changes in the domestic
q discuss the main factors affecting the position of the dd scheduleanswer the level of government taxes demand and investment and the
q consider the economy is initially consuming along the intertemporal budget constraint at point a where no saving occurs how does a fall in the
q explain how a rise in real income affects aggregate demandanswer an increase in domestic real income y leads to a rise in disposable
q explain how an increase in the real exchange rate affects exports and imports answer while the real exchange rate rises domestic products
qimagine that the economy is at a point on the dd-aa schedule that is above both aa and dd and where both the output and asset markets are out of
q explain how the aa schedule is derivedanswer for a fixed real money supply an enhancement in output leads to an increase in the domestic interest
q explain how an increase in government spending would affect the dd-aa schedule in the short runanswer a raise in government spending will raise
q suppose russias inflation rate is 200 over one year but the inflation rate in switzerland is only 2 according to relative ppp what should happen
q describe the chain of events leading to exchange rate determination for the following cases1 an increase in the us money supply2 an increase in the
q how can long-run values in the real exchange rate changeanswer a elevate in world relative demand for us output origins a long-run real
q what is the real exchange rate between the dollar and the euro equal to answer let actual dollareuro exchange rate qenominal exchange rate
q what are the predictions of the ppp theory with regard to the real exchange rates answer the real exchange rate among two countries is a
q explain why price levels are lower in poorer countriesanswer one theory explicate the difference in prices on different endowments of capital
what can explain the failure of relative ppp to hold in realityanswer government procedures of the price level differ from country to countryone
what effect do non-tradable goods have on pppanswer the consequence is quite substantial in 1997 the production of non-tradable goods
does the existence of non-tradable goods allow for deviations from purchasing power parityanswer yes the continuation of non-tradable goods
is a depreciation of the dollareuro exchange rate correlated with a decrease in the dollar return on us depositsanswer no suppose that the
what is the fisher effect provide an exampleanswer all moreover equal a rise in a countrys expected inflation rate will ultimately cause an equal
describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the ppp
discuss the effects of ongoing inflation based on the ppp theoryanswer other things equivalent money supply growth at a constant rate eventually
what are the predictions for the long run of the monetary approach answer money supplies- known the
present and explain the fundamental equation of the monetary approach answer suppose ee puspe and that domestic price levels depend on domestic
explain why the exchange rate model based on ppp is a long-run theoryanswer ppp theory is a financial approach to the exchange rate it is a
explain why relative ppp is useful when comparing countries that base their price levels on different product basketsanswer for instance if the