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What is the absorption approach to the balance of trade?




1. What is the absorption approach to the balance of trade?;2. Explain how unpleasant monetarist arithmetic can be less unpleasant if interest rates are near zero?;3. How do sudden changes in exchange rates directly affect the balance of trade through the J curve?;4. What is the key long run implication of purchasing power parity?;5. Why is the purchasing power parity theory a dangerous way to determine the ?right exchange rate? or degree of exchange-rate misalignment, at any given time?;6. If the Federal Reserve implements a lax, easy monetary policy, what will happen to the price of bonds and the bond rate of return in the short-term?;8. What is the main reason for pressing for central bank independence from the fiscal authority?;9. In a recent Economist, we see that China has a trade balance (surplus) of 2.0% of GDP but a fiscal deficit of 2.9% of GDP (a fiscal balance of -2.9% of GDP). What does this imply about the Saving-Investment balance of China relative to GDP?


Paper#29858 | Written in 18-Jul-2015

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