Describe the difficult choices in macroeconomic policy that Argentina faced in the late 1990s
What will be an ideal response?
To address its macroeconomic problems in the early 1990s, Argentina fixed its currency to the U.S. dollar at a 1:1 rate and dramatically restricted the creation of new money. For every new Argentine peso put into circulation, the central bank was required to have a U.S. dollar to back it up and a currency board was created to oversee the system and enforce the rules. Later in the decade as Argentina faced recession, policy makers faced difficult choices. They could use expansionary macroeconomic policy to deal with the recession or they could maintain the peso's link to the dollar. They could devalue and increase the debt burden or they could maintain the exchange rate and watch the current account deficit grow and the economy shrink. They could cut spending to maintain fiscal soundness or increase spending to address the recession.
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A firm in monopolistic competition maximizes its profit by ________
A. differentiating its good and producing the quantity at which price equals marginal revenue B. producing the quantity at which marginal revenue equals marginal cost and then adding a markup C. raising its price and producing so that it always has excess capacity D. producing the quantity at which marginal cost equals marginal reve-nue and charging the highest price at which it can sell that quantity
All of the following are arguments against free trade EXCEPT
A) the infant industry argument. B) dumping. C) comparative advantage. D) the need to protect American jobs.
Bank depositors will not lose their deposits in a banking panic if:
A. there is 100% reserve banking. B. there is fractional reserve banking. C. there is a central bank. D. the actual reserve/deposit ratio equals the desired reserve/deposit ratio.
Import restrictions create an incentive to smuggle
Indicate whether the statement is true or false