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As G increases, IS 1 shifts to IS 2 . At new equilibrium e', interest rate also increase and i > i*. Here,2 things are happening: a) there will now be capital inflow as a result capital A/c surplus b) Since, AD and Y increased, import demand will increase which will lead to current A/c deficit. Since, the magnitude of Capital A/c surplus will be much higher than the magnitude of current A/c deficit; there is BOP surplus. As a result domestic currency appreciates; dd for rupee has increased. As a result Exports decrease and Imports increase (imports have become cheaper) [Net exports falls] IS shifts back to initial level and equilibrium in the goods market is restored. In a small open economy with a floating exchange rate, the supply of real money balances is fixed and a rise in government spending raises the interest rate, so that income must rise to maintain equilibrium in the money market.
The devaluation of a country’s currency will lead to an improvement in its balance of trade with the rest of the world only if
The concept of vicious circle of poverty is associated with
Which of the following statements about graphs of short-run cost curves is false?
For the 2 variables x and y with the same mean, the regression equation are y = 5x+b and x=7y +c. Calculate b/c
If the money supply grows 5 per cent, and real output grows 2 per cent, prices should rise by
Whenrxy>0,thenbyxandbxyareboth:
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then the number of pure strategy Nash Eq...
In the context of lexicographic utility functions, which of the following scenarios is impossible?
Economists generally believe that making assumptions is
Consider sample of 8 observation and regress Y on X and find the standard error of regression