What are the three major types of foreign-exchange systems, and how do they operate?
What will be an ideal response?
The three major types of foreign-exchange systems are the fixed exchange-rate system, the floating exchange-rate system, and the managed float exchange-rate system. A fixed exchange rate exists when the government maintains one fixed rate at which currency can be exchanged. The currency can be fixed relative to all other currencies, it can be fixed relative to a specific amount of gold (the gold standard), it can be fixed to a basket of several currencies or fixed to just one other currency (an exchange-rate peg). A floating exchange-rate is determined solely by equilibrium of demand and supply in the foreign exchange market. Under a managed float, the exchange rate is primarily determined by demand and supply in the market for foreign exchange, with occasional central bank intervention. This is also called a dirty float regime.
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Refer to Figure 2.1. What is the opportunity cost of increasing production of manufactured products from 500 tons to 600 tons per year?
A) 200 tons of agricultural products per year B) 400 tons of agricultural products per year C) 500 tons of agricultural products per year D) 600 tons of agricultural products per year
In practice, the ECB has committed to what type of strategy for monetary policy?
A) inflation targeting B) monetary targeting C) unclear as to inflation or monetary targeting D) exchange rate targeting
The price of one product in terms of another commodity is called its
A) relative price. B) money price. C) financial price. D) converse price.
A monopolist maximizes profit:
a. by charging the highest possible price on the demand curve. b. by charging a price that equals its marginal cost. c. by producing a level of output where the average-cost curve intersects the demand curve. d. by producing a level of output where marginal revenue equals marginal cost. e. by charging a price equal to its average total cost.