Answer (c) only. Question 2(a) Distinguish between a government deficit and trade deficit?(b) Would you rather live in a nation with a with a high per capita GDP and a low grow thrate, or in a nation with a low per capita GDP and a high growth rate?(c) Briefly explain the quantity theory of money and how it is related to inflation.(d) Suppose A&K Sound Sys te m is considering building a reco rd studio in Cayman Islands.(i) Assume that A&K Sound System needs borrow money on the bond market. Whywould an increase in interest rates affect the decision whether to build the.studio?(ii) If A&K Sound System has enough of its funds to finance the new studio withoutborrowing, would an increase in interest still affect the decision about whe then tobuild the studio? Explain your ans wer.

Answered: =) Briefly explain the quantity theory…

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=) Briefly explain the quantity theory of money and how it is related to inflation.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter29: Exchange Rates And International Capital Flows

Section: Chapter Questions

Problem 6SCQ: A booming economy can attract financial capital inflows, which promote further growth. However,...

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Question 2(a) Distinguish between a government deficit and trade deficit? (b) Would you rather live in a nation with a with a high per capita GDP and a low growth rate, or in a nation with a low per capita GDP and a high growth rate? (c) Briefly explain the quantity theory of money and how it is related to inflation
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Suppose a country was facing the problem of budget deficit and by reducing government expenditures the government has achieved the target of balanced budget. With the help of appropriate diagrams explain how a country’s shift from budget deficit to balanced budget would affect its investments, economic growth, net capital outflow and currency exchange rate?