Use a figure to study the following question: Imagine that the economy is at a point on the DD-AA schedule that is above both AA and DD, where both the output and asset markets are out of equilibrium. Explain what will happen next
What will be an ideal response?
Since the asset market adjusts very quickly, the exchange rate drops immediately to a point on the AA schedule. There will be excess demand for the domestic currency because the high expected future appreciation rate of the domestic currency implies that the expected domestic currency return on foreign deposits is below that on domestic deposits. This excess demand leads to an immediate fall in the exchange rate.
The figure:
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If the firm in the figure above is unregulated, the consumer surplus will be
A) zero. B) $100. C) $400. D) $200.
Suppose a monopolist and a perfectly competitive firm both have the same cost curves. The monopolist would
a. charge a lower price than the perfectly competitive firm b. charge a higher price than the perfectly competitive firm c. charge the same price as the perfectly competitive firm d. refuse to operate in the short run unless an economic profit could be made, unlike the perfectly competitive firm e. refuse to operate in the short run if an economic loss was present, unlike the perfectly competitive firm
Your grandfather tells you that he earned $.50 per hour at his job when he was a boy in 1929
a. Given that the CPI was 17.1 in 1929 and 184.0 in 2003, how much would you have to make in 2003 to have the same real hourly wage? b. You made $5.50 an hour working during 2003 . Were you better off than your grandfather in terms of purchasing power? Explain. c. Your grandfather also tells you that a soda cost $.05 in 1929, and you know a soda cost $.55 in 2003 . You decide to use the price of a soda as the price index. How much would the 2003 "soda equivalent" of $.50 per hour in 1929 be?
Economists mostly agree that the problem of climate change necessitates government action in the form of market-based incentives such as
What will be an ideal response?