Brief Principles of Macroeconomics...
Solutions
Brief Principles of Macroeconomics...
In the model of the open economy just developed, two markets determine two relative prices. What are the markets? What are the two relative prices?
The two different markets and two different prices determined by them.
The foreign exchange market is the place of market where the participants are able to buy and sell the different foreign currencies with exchange to the domestic currency. Here, the lonable fund interest rate theory applies. The lonable fund includes all the forms of credit of the economy, which includes the loans, bonds, and the savings deposits.
Thus, the two different markets that are developed in the economy are the market for the lonable funds in the economy and the market for the foreign currency exchange in the economy...
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