"In the foreign exchange market, if the demand for the U.S. dollar increases, the U.S. dollar appreciates in value." Briefly explain whether the previous statement is correct or incorrect
What will be an ideal response?
The statement is correct. The increase in the demand for dollars shifts the demand curve for dollars rightward and creates a shortage of dollars at the initial exchange rate. This shortage puts upward pressure on the exchange rate and so the exchange rate rises to its new equilibrium value.
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The demand curve for labor is the
A) marginal factor cost curve for labor. B) marginal physical product curve for labor. C) marginal physical product curve for labor times the wage rate. D) marginal revenue product curve for labor.
If you were a Keynesian and wanted to stimulate the economy (to increase real GDP), you would
a. increase the money supply to lower the interest rate in order to increase investment b. increase the money supply to lower the interest rate in order to decrease investment c. decrease the money supply to lower the interest rate in order to increase investment d. decrease the money supply, which causes consumption to increase and saving to fall e. increase the money supply, which causes the interest rate to increase and production to increase as well
Before the breakup of AT&T several years ago, profits on long-distance calls offset losses on basic residential service. This practice is known as
A. abuse of monopolistic power. B. cream skimming. C. cross-subsidization. D. the Ramsey rule.
The allocative function of price cannot operate unless there is:
A. a significant barrier to entry. B. either free entry or free exit. C. both free entry and free exit. D. neither free entry no free exit.