If the economy is represented in the graph shown and is currently at point E2, which action is the Fed most likely to undertake?
A. Expansionary monetary policy, because it will shift AD to the right.
B. Contractionary monetary policy, because it will shift AD to the left.
C. Expansionary monetary policy, because it will shift AD to the left.
D. Contractionary monetary policy, because it will shift AS to the right.
A. Expansionary monetary policy, because it will shift AD to the right.
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Explain the distinction between investment and capital.
What will be an ideal response?
Net exports will tend to be low when the real exchange rate:
A. is low. B. is high. C. depreciates. D. equals the nominal exchange rate.
An undervalued exchange rate is an exchange rate:
A. that equals the number of units of a foreign currency over the number of units of domestic currency. B. that has an officially fixed value greater than its fundamental value. C. that has an officially fixed value less than its fundamental value. D. at which the quantities of currencies demanded and supplied in the foreign exchange market are equal.
A production possibilities curve is plotted for a nation producing cotton and jute. Which of the following will cause a parallel rightward shift of the production possibilities curve?
A) An invention of a new fertilizer that increases cotton production by ten percent, without any effect on jute production B) An invention of a new fertilizer that increases jute production by five percent, without any effect on cotton production C) An invention of a new fertilizer that increases production of both cotton and jute by ten percent D) A two-times increase in the price of all cotton products and a three-times increase in the price of all jute products