In the monetary small open-economy model, a flexible exchange rate insulates the domestic price level from
A) both real and nominal shocks from abroad.
B) real shocks from abroad, but not from nominal shocks from abroad.
C) nominal shocks from abroad, but not from real shocks from abroad.
D) neither real nor nominal shocks from abroad.
C
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If a perfectly competitive firm produces an output level at which price is less than marginal costs, then the firm should:
A. reduce output to earn greater profits or smaller losses. B. leave its output level unchanged provided it is covering its variable cost. C. expand output to earn greater profits or smaller losses. D. raise its price.
The idea that all aspects of economic behavior, such as labor supply, saving, and investment, respond to economic incentives, especially tax rates, is known as
A) New Keynesian economics. B) new classical economics. C) tax-structured classical economics. D) supply-side economics.
If an excise tax is placed on a product that has a price elasticity of demand equal to zero, then the
a. entire tax will be paid by the consumer b. entire tax will be paid by the producer c. consumer and producer will each pay a share of the tax d. incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply e. tax is progressive
When the price of steel rises, Ford uses more aluminum in the production of its cars. This is an example of
a. substitution in consumption. b. substitution in production. c. a change in the marginal productivity of a resource. d. derived demand.