For a given domestic and foreign price level, a decrease in the nominal exchange rate ________ the real exchange rate.
A. decreases
B. increases
C. offsets any change in
D. may either increase or decrease
Answer: A
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The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.
Refer to Figure 13-1. Ceteris paribus, a decrease in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.
Assuming that, over a given period, the value of transactions in current dollars is $8 trillion and the money stock is $500 billion. What is the transaction velocity of money?
a. .0625 b. 12 c. 16 d. None of the above
Why may a "black market" develop in nations in which government has imposed capital controls?
a. All foreign currency purchases and sales are conducted and controlled by the government, and it is illegal to trade privately. b. Traders are trying to avoid the taxes they must pay on each transaction. c. The government makes a huge profit on currency trades that the private sector wants access to. d. None of these explains why a "black market" may develop in these nations.