Idreesz, nicely done. Remember a key thing about Int’l Fischer relation is that it assumes the real exchange rate is constant. Assuming that, a change in the interest rate is completely explained by a change in the inflation rate.
1. Factor cost + taxes - subsidies = market price
2. International Fisher relation measures expected change in inflation rate to the difference between the two countries’ nominal interest rates for that time.
while
Relative PPP measures the inflation rate in each country to the change in the market exchange rate
Here’s one for ya:
1. How do you get market prices from factor cost?
2. Differentiate between the International Fischer relation and Relative Purchasing Power Parity.
soddy1979 Wrote:
——————————————————-
Neoclassical growth theorists hold that economic
growth is independent of population growth (as
opposed to classical theorists). Neoclassical
theorists believe that population growth is a
function of the opportunity cost of women to work,
where an increase in this cost leads to more women
working and thus lower birth rates. Population
growth is also effected by improvements in
healthcare and thus lower death rates.
Thanks.
发表于 2013-3-31 13:01
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