Explain each of the following and why each might be used: hard pegs, currency boards, and dollarizations
What will be an ideal response?
A hard peg is a fixed exchange rate regime where policy makers, in some way, have made it symbolically or technically harder to change the peg. A dollarization occurs when the domestic currency is replaced by a foreign currency (typically the dollar). Under a currency board, the central bank is prepared to exchange foreign currency for domestic currency at some official rate. Furthermore, the central bank cannot engage in open market operations.
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Refer to the figure above. What is the absolute value of the arc elasticity of demand when the price falls from $8 to $4?
A) 2 B) 4 C) 8 D) 10
The income distribution is a more accurate measure of economic inequality than the wealth distribution because income excludes human capital
Indicate whether the statement is true or false
The output gap is zero when
A) Actual real GDP > Natural real GDP. B) Actual real GDP = Natural real GDP. C) Actual real GDP < Natural real GDP. D) Natural real GDP = 0.
One firm previously operated as a monopoly. Now, one potential entrant exists. Consumers would prefer
A) entry, and the firms to split the output equally. B) no entry, and for the incumbent to produce the Stackelberg leader level of output. C) entry, and for the incumbent to produce the Stackelberg leader level of output. D) no entry, and the monopoly to continue.