With fixed exchange rates, an increase in the foreign inflation rate, with constant income and domestic credit, will lead to
A) a change in the exchange rate.
B) an increase in international reserves.
C) a decrease in international reserves.
D) no change in international reserves.
B
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A reaction function is
A) companies colluding in order to make higher than competitive rates of return. B) the manner in which one oligopolist reacts to a change in price made by another oligopolist in the industry. C) a game in which firms will not negotiate in any way. D) when plans made by firms are known as game strategies.
The argument in favor of rational expectations is that
A. people will continue to acquire information as long as the marginal benefit of that information is positive. B. individuals have a very good idea of what to expect from the government in terms of monetary policy but not fiscal policy. C. if expectations were not rational, there would be unexploited profit opportunities available. D. it is costless for individuals and firms to form rational expectations.
Assume a monopolist's marginal cost and marginal revenue curves intersect and the demand curve passes above its average total cost curve. The firm will:
a. make an economic profit. b. stay in operation in the short run, but shut down in the long run. c. shut down in the short run. d. lower the price.
When the Fed buys U.S. government securities from a member bank, _____
a. there is a decrease in its assets b. there is an increase in its assets c. there is a decrease in its liabilities d. there is an increase in its liabilities e. its total assets and liabilities remain unchanged