Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?
A. A decrease in domestic interest rates
B. An increase in foreign interest rates
C. Domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices
D. Stable domestic prices while the nation's trading partners are experiencing 10 percent inflation
Answer: D
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To fully understand how taxes affect economic well-being, we must
a. assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. b. compare the taxes raised in the United States with those raised in other countries, especially France. c. compare the reduced welfare of buyers and sellers to the amount of revenue the government raises. d. take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.
Which of the following claims concerning the importance of effects that explain the slope of the U.S. aggregate-demand curve is correct?
a. The exchange-rate effect is relatively small because exports and imports are a small part of real GDP. b. The interest-rate effect is relatively small because investment spending is not very responsive to interest rate changes. c. The wealth effect is relatively large because money holdings are a significant portion of most households' wealth. d. None of the above is correct.
Mathematically the marginal rate of substitution is
A. always a positive number. B. is equal to 1. C. sometimes a positive and sometimes a negative number. D. always a negative number.
Refer to the diagram. Assume that the natural rate of unemployment is 5 percent and that the economy is initially operating at point a, where the expected and actual rates of inflation are each 6 percent. In the long run, the decline in the actual rate of inflation from 6 percent to 4 percent will:
A. reduce the unemployment rate.
B. reduce corporate profits in real terms.
C. have no effect on the unemployment rate.
D. reduce real domestic output.