When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand
B. increase; raise; decline
C. decline; lower; decline
D. decline; raise; decline
Answer: B
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Based on the figure above, which of the following factors could lead the supply curve to shift leftward from S0 to S1?
A) a rise in the U.S. exchange rate B) a fall in the U.S. interest rate C) a fall in the U.S. exchange rate D) a fall in foreign interest rates E) a rise in expected future U.S. exchange rate The figure above shows the market for foreign exchange in 2001 and 2009.
The inefficiency of a sales tax on a good is ultimately the result of the
A) low tax revenue earned by the government relative to the cost of collection. B) wedge between what buyers pay for the good and what sellers receive for the good. C) buyers being unable to avoid paying the tax. D) sellers being unable to avoid paying the tax. E) increase in the consumer surplus that is more than offset by the decrease in the producer surplus.
Vertical relationships can increase profits through
a. preventing firms from evading regulation b. creating a double-markup problem c. better aligning the incentives of manufacturers and retailers d. preventing price discrimination
There is a flexible exchange rate system and only two countries in the world, the United States and Mexico. The real interest rate in the United States rises relative to the real interest rate in Mexico. It follows that
A) the dollar will depreciate and the peso will appreciate. B) the peso will depreciate and the dollar will appreciate. C) both the peso and the dollar are likely to appreciate. D) both the peso and the dollar are likely to depreciate.