From 1980 to 2000, the yen-dollar exchange rate fell from 240 yen/dollar to 102 yen/dollar, while the dollar-pound exchange rate fell from 2.22 dollars/pound to 1.62 dollars/pound. As a result
A. the dollar appreciated relative to both the yen and the pound.
B. the dollar depreciated relative to the yen, but appreciated relative to the pound.
C. the dollar depreciated relative to both the yen and the pound.
D. the dollar appreciated relative to the yen, but depreciated relative to the pound.
Answer: B
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A lender who is worried that its cost of funds might rise during the term of a loan it has made can hedge against this rise without eliminating the chance to profit from a decline in the cost of funds by
A) buying futures contracts on Treasury bills. B) selling futures contracts on Treasury bills. C) buying put options on Treasury bills. D) buying call options on Treasury bills.
If Ricardian equivalence holds, one way to get the expansionary effects of a tax cut to occur is:
A. pair it with increased government spending. B. pair it with reduced government spending. C. to run a campaign inspiring people to buy goods made in the United States. D. None of these will create the expansionary effects of a tax cut.
A monopoly has two production plants with cost functions C1 = 50 + 0.1Q12 and C2 = 30 + 0.05Q22. The demand it faces is Q = 500 ? 10P. What is the condition for profit maximization?
A. MC1(Q1 + Q2) = MC2(Q1 + Q2) = MR (Q1 + Q2). B. MC1(Q1 + Q2) = MC2(Q1 + Q2) = P (Q1 + Q2). C. MC1(Q1) = MC2(Q2) = MR(Q1 + Q2). D. MC1(Q1) = MC2(Q2) = P(Q1 + Q2).
When marginal utility is positive but decreasing, total utility is
A. decreasing. B. increasing. C. zero. D. negative.