When exchange rates are volatile:
A) firms are assured that they will be able to earn profits from currency swings.
B) firms engage in more trade.
C) trade and cross-border financial and labor flows are reduced as uncertainty and transaction costs take their toll.
D) international economic activity is increased.
Ans: C) trade and cross-border financial and labor flows are reduced as uncertainty and transaction costs take their toll.
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When marginal revenue for a seller is more than marginal cost, the seller is
A) making a positive net revenue but not necessarily maximizing net revenue. B) maximizing net revenue and making a positive net revenue. C) maximizing net revenue even if net revenue is negative. D) not maximizing net revenue.
Complete crowding out implies that a government deficit financed by selling bonds to the nonblank public will
A) have no effect on aggregate demand. B) reduce aggregate demand. C) increase aggregate demand. D) reduce aggregate demand in the short run but cause demand to increase in the long run.
In the balance of payments, the settlement account
a. must exactly offset the net deficit or surplus in the other accounts. b. often exceeds the net deficit or surplus in the other accounts. c. is often less than the net deficit or surplus in the other accounts. d. is unrelated to the net deficit or surplus in the other accounts.
If aggregate demand and aggregate supply both shift right, we can be sure that the price level is higher in the short run
a. True b. False Indicate whether the statement is true or false