In an economy where aggregate spending is given by Y = 5,500 + 0.6Y - 20,000r, the interest rate is currently 2 percent (0.02). If potential output equals 8,000, the central bank must ________ the interest rate to close the ________ gap.
A. raise; expansionary
B. raise; recessionary
C. lower; recessionary
D. lower; expansionary
Answer: A
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Suppose the current exchange rate between the Chinese yuan and the United States dollar is 7 yuan per dollar. If the Fed sought to drive up the exchange rate to 8 yuan per dollar then it would
A) buy dollars. B) sell dollars. C) buy yuan. D) sell dollars and buy yuan.
Total costs:
A. are fixed costs plus variable costs. B. include explicit and implicit costs. C. increases as the firm increases output. D. All of these are true.
The demand curve for Japanese yen is downward sloping because when the exchange rate (measured in dollars per yen) falls,
a. Japanese goods become relatively cheaper so foreigners buy more of them and need more yen to do so. b. foreigners need more dollars to buy one yen so they can now afford more Japanese goods. c. the yen demand curve shifts to the right as foreigners try to buy more Japanese goods. d. the dollar becomes weaker and this reduces the strength of both economies. e. everyone wants fewer yen because they have lost some of their underlying value.
Supporters of comparable worth claim that market correctly allocates the workers in their best paid works
a. True b. False Indicate whether the statement is true or false