A9 1. A fundamental problem in international economics is how to produce a world government that canharmonize trade and menetary policies.2. The idea of risk aversion helps explain the losses suffered by the insurance industry.3. A country that joins an exchange rate area gives up its ability to use the exchange rate and monetary policyfor the purpose of stabilizing output and employment.4. The dollar rate of return on cure deposits is approximately the curo interest rate plus the rate of depreciationof the dollar against the euro.5. The exchange rate between currencies depends on the interest rate that can be earned on deposits of thosecountries and the current exchange rate.

Answered: 1. A fundamental problem in…

1. A fundamental problem in international economics is how to produce a world government that can harmonize trade and monetary policies.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 8P

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

1. A fundamental problem in international economics is how to produce a world government that can
harmonize trade and menetary policies.
2. The idea of risk aversion helps explain the losses suffered by the insurance industry.
3. A country that joins an exchange rate area gives up its ability to use the exchange rate and monetary policy
for the purpose of stabilizing output and employment.
4. The dollar rate of return on cure deposits is approximately the curo interest rate plus the rate of depreciation
of the dollar against the euro.
5. The exchange rate between currencies depends on the interest rate that can be earned on deposits of those
countries and the current exchange rate.

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