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1. Use a 3-panel diagram, like Figure 6-6, to show how the number of firms, mark-up and firm size would change in a closed economy if the demand for a particular good rose, i.e. the demand curve shifted out.
2. When the German reunification took place, Germany’s labour force rose much more than its capital stock (since much of East Germany’s capital stock was useless in the market economy). Use a diagram to analyse what the medium-term growth effects should have been. Go on the internet to find out what actually happened to German growth after reunification.
3. Explain why the immigration of low-skilled workers can hurt native low-skilled workers and benefit high-skilled workers.
4. Does PPP imply that the inflation rate must be the same in every country under fixed exchange rate arrangements?
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