Speculators play an important role in a system of floating exchange rates because
a. to make a profit, they must buy a currency when its value is low and sell it when its value is high.
b. their purchases and sales lead to wild gyrations in exchange rates and thus increase instability.
c. they place additional risks on businesses that need to purchase and sell foreign currency.
d. All of the above are correct.
a
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When the Fed unexpectedly reduces the money supply, it will cause a decrease in aggregate demand because
a. real interest rates will rise, lowering business investment and consumer spending. b. the dollar will depreciate on the foreign exchange market, leading to an increase in net exports. c. lower interest rates will cause the value of assets (for example, stocks) to rise. d. the national debt will increase, causing consumers to reduce their spending.
An unexpected sharp reduction in inflation will most likely result in
a. the rapid growth of output and employment. b. a reduction in the actual rate of unemployment. c. a reduction in the natural rate of unemployment. d. a temporary increase in unemployment and a decline in real output.
The circular flow model assumes:
A. businesses and households own the factors of production. B. businesses own the factors of production. C. government owns the factors of production. D. households own the factors of production.
In the above figure, a decrease in the expected profit will result in a movement from point E to
A) point F. B) point G. C) point H. D) point I.