Using a flow chart, illustrate the effects of contracting the money supply in a country with floating exchange rates.
What will be an ideal response?
POSSIBLE RESPONSE:
The flow-diagram above shows the effects of contracting the money supply in a country with floating exchange rates. The immediate effect is the rise in interest rates which, in the short run, raises capital inflows. Domestic real spending, production, and income fall and create a downward pressure on the price level. Beyond the short run, the price level also falls. Both of these effects help to improve the current account balance as the level of imports declines as income falls. Exports increase, and imports decrease following a decline in the price level, which improves the current account balance. An increase in capital inflows and the improvement in the current account balance together result in an appreciation of the domestic currency relative to foreign currencies. As domestic currency appreciates, the current account deteriorates. So, the nation experiences a further fall in the level of real product and income.
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The Grangers were the first farm organization of importance and are noted for
a. encouraging the federal government to re-issue "greenbacks.". b. establishing cooperatives that sold farm and consumer goods to their members. c. refusing to sell grain to foreign countries. d. forming a cartel that set upper limits on members' output of basic farm products. e. All of the above.
When a firm’s fixed cost increases,
A. the firm needs to adjust its price and quantity to restore the profit maximum. B. it would not need to change output. C. marginal cost increases. D. variable cost increases.
Which of the following lists the three types of firms in the United States from smallest to largest in terms of volume of sales?
a. partnerships, sole proprietorships, corporations b. sole proprietorships, partnerships, corporations c. sole proprietorships, corporations, partnerships d. corporations, partnerships, sole proprietorships e. partnerships, corporations, sole proprietorships
When demand increases in a perfectly competitive market, in the short run _______________, and in the long run _______________.
A. quantity supplied increases; supply increases B. quantity supplied increases; supply decreases C. quantity supplied decreases; supply decreases D. quantity supplied decreases; supply increases