Features of Open Economy

What does an open economy encourage?

Which feature is typically associated with an open economy?

In an open economy, what is the main advantage of allowing foreign investments?

Which of the following is NOT a characteristic of an open economy?

What is a key feature of an open economy?

What measures can a country take to protect its currency from excessive depreciation or appreciation?

Discuss the role of speculative activities in the foreign exchange market. How do they influence currency values?

How does a country’s foreign exchange reserves impact its economic stability and international trade relations?

What are the primary functions of foreign exchange markets?

Explain the relationship between exchange rates and inflation. How does a high inflation rate in a country affect its currency value?

How do tariffs and non-tariff barriers impact international trade? Provide examples.

What is the role of international financial institutions like the IMF and the World Bank in the global economy?

Discuss the concept of trade balance. How does it affect the current account and the overall economy?

How does a fixed exchange rate system work? What are its advantages and disadvantages?

Explain the concept of capital account convertibility. What are the implications of full capital account convertibility for a developing country like India?

Why is the open economy autonomous expenditure multiplier smaller than the closed economy one?

What is the marginal propensity to import when M = 60 + 0.06Y? What is the relationship between the marginal propensity to import and the aggregate demand function?

Are the concepts of demand for domestic goods and domestic demand for goods the same?

Would the central bank need to intervene in a managed floating system? Explain why.

Differentiate between devaluation and depreciation.