Suppose that Ruritania has a fixed exchange rate versus the U.S. dollar
If foreign investors become convinced that the Ruritanian currency is overvalued, what actions might they take to profit from this conviction? Would these actions make it easier or harder for Ruritania to maintain the value of its currency versus the dollar? Why?
Foreign investors will want to sell Ruritanian currency denominated assets and buy dollar denominated assets. These actions will drain Ruritania's dollar reserves and make it harder for Ruritania to maintain the value of its currency versus the dollar.
You might also like to view...
If the price of chicken rises from $1.25 per pound to $1.75 per pound, and the quantity demanded goes from 250 pounds per day to 175 pounds per day, this illustrates
A. the law of diminishing returns. B. the law of supply. C. the law of demand. D. the law of supply and demand.
If the demand for labor increases
I. employment increases. II. the real wage rate increases. A) Only I is correct. B) Only II is correct. C) Both I and II are correct. D) Neither I nor II is correct.
An ad valorem tax imposed on a monopolist will reduce the deadweight loss generated by the monopolist
Indicate whether the statement is true or false
Low cost strategies are usually found in industries where
a. Products are not particularly differentiated b. Price competition tends to be fierce c. Both a and b d. None of the above