Which of following is most likely to happen when the dollar appreciates against the euro?
A. The prices of American goods in the European countries will decline.
B. The prices of European goods in the U.S. markets will decline.
C. The rate of inflation in the United States will increase.
D. There will be a huge inflow of "hot money" to the European nations.
Answer: B
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
The Glass-Steagall Act was designed to
A) legally separate investment banking from commercial banking. B) promote mergers in the banking industry. C) impose high capital ratios on investment banks. D) promote the interests of community banks.
Critics of the current system of flexible exchange rates allege that it
a. promotes inflation b. promotes unemployment c. gives central banks too little discretion over their money supplies d. restricts the growth of developing countries e. gives too much financial power to industrial countries
If the marginal propensity to consume (MPC) is 0.75 and if policy makers wish to increase real GDP by $300 million to fight a recession, then by how much would taxes have to change?
a. -$30 million b. -$50 million c. -100 million d. -300 million