The effect of an exchange rate system on the price level between countries is that:
A) exchange rate volatility causes the prices to converge between countries.
B) a fixed exchange rate results in price convergence.
C) a fixed exchange rate results in price divergence.
D) all member nations of the ERM saw a divergence in prices.
Ans: B) a fixed exchange rate results in price convergence.
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As an economic concept, scarcity applies to
A) both money and time. B) money but not time. C) time but not money. D) neither time nor money.
Which of the following statements is most likely correct?
a. A nation may sometimes want a stronger exchange rate to stimulate aggregate demand and reduce a recession or to fight inflation. b. A nation may sometimes want a weaker exchange rate to stimulate aggregate supply and reduce a recession or a stronger exchange rate to fight inflation. c. A nation may sometimes want a stronger exchange rate to stimulate aggregate demand and fight inflation or a weaker exchange rate to reduce a recession. d. A nation may sometimes want a weaker exchange rate to stimulate aggregate demand and reduce a recession or to fight inflation.
Figure (a) represents the domestic demand and supply of televisions. However, if free trade is allowed and the current world price of televisions is P1 as shown in Figure (b) then the domestically produced quantity would be
a. Q1 and the domestically consumed quantity of televisions would be Q2.
b. Q2 and the domestically consumed quantity of televisions would be Q1.
c. Q3 and the domestically consumed quantity of televisions would be Q4.
d. Q4 and the domestically consumed quantity of televisions would be Q3.
Reverse causation is the idea that
A. expected future increases in output cause increases in the current money supply. B. current increases in output cause future increases in the money supply. C. current increases in the money supply cause future increases in output. D. expected future increases in the money supply cause increases in current output.