From uncovered interest parity, we know that when the domestic currency is expected to depreciate, the domestic interest rate should be:
a. greater than the foreign interest rate.
b. greater than the foreign exchange rate.
c. less than the foreign interest rate.
d. less than the foreign exchange rate.
Ans: a. greater than the foreign interest rate.
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
An increasing trade deficit for Micromania will, ceteris paribus, lead to a devaluation of Micros (Micromania's currency) in world currency markets
Indicate whether the statement is true or false
Other things the same, a higher real exchange rate raises net exports
a. True b. False Indicate whether the statement is true or false
If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Suppose that Ana and Leo decide to work together as a team. Can they produce 2 pounds of fudge and 4.5 pounds of toffee each hour?
A. No, this point is not attainable. B. Yes, this point is both attainable and efficient. C. Yes, this point is attainable, but inefficient. D. No, this point is not attainable and inefficient.