Re: DSE 2012 paper discussion-Please join
Posted by Dreyfus on Jun 09, 2014; 1:23pm
URL: http://discussion-forum.276.s1.nabble.com/DSE-2012-paper-discussion-Please-join-tp7590218p7592029.html
Well that's OK u r getting the downward sloping schedule...but what matters is the eq of interest parity condition given wrong in the question.
Not only this in q58 if according to dse's answer key if Marshall Lerner condition satisfied the depriciation of home currency must improve trade ie dNX/de <0 as when e decreases home currency gets depriciate
But according to answer key de/dy>0 which implies that dNX/de>0 as de/dy can be expressed as (de/dNX)*(dNX/dy) and dNX/dy =1. This means that appreciation of home currency is improving trade balance!
URL: http://discussion-forum.276.s1.nabble.com/DSE-2012-paper-discussion-Please-join-tp7590218p7592029.html
Well that's OK u r getting the downward sloping schedule...but what matters is the eq of interest parity condition given wrong in the question.
Not only this in q58 if according to dse's answer key if Marshall Lerner condition satisfied the depriciation of home currency must improve trade ie dNX/de <0 as when e decreases home currency gets depriciate
But according to answer key de/dy>0 which implies that dNX/de>0 as de/dy can be expressed as (de/dNX)*(dNX/dy) and dNX/dy =1. This means that appreciation of home currency is improving trade balance!
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