Assume that the U.S. interest rate is 5%, the European interest rate is 2%, and the future expected exchange rate in one year is $1.224. At approximately what exchange rate will the returns between the United States and Europe be equalized?
a. $1.20
b. $1.224
c. $1.188
d. $1.98
Ans: c. $1.188
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A business cycle peak is a
A) small positive deviation from trend in real GDP. B) relatively large positive deviation from trend in real GDP. C) small negative deviation from trend in real GDP. D) relatively large negative deviation from trend in real GDP.
If those who consumed common resources were subject to a tax that was equal to the external costs that they imposed due to the negative externality created:
A. individuals would consume less. B. total surplus would be maximized for the whole society. C. an efficient level would be reached. D. All of these statements are true.
If the Fed buys government bonds through open-market operations, it will
A) increase the demand for bonds in the bond market. B) decrease the demand for bonds in the bond market. C) increase the supply of bonds in the bond market. D) decrease the supply of bonds in the bond market.
Economies of scale in the production of a good imply that:
What will be an ideal response?