Why is it important to understand fixed exchange rates in the modern global economy?
What will be an ideal response?
Fixed rates continue to be important for four reasons:
1. Managed floating: Central banks intervene in foreign exchange markets.
2. Regional currency arrangements: Some countries peg their currency to another currency.
3. Developing countries and countries in transition: These countries often attempt to peg their currency to another currency.
4. Lessons of the past: Fixed exchange rates could have a resurgence.
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Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded, how many belts will Estonia consume?
A) 50 B) 70 C) 90 D) 120
The depreciation of a currency may cause an initial worsening of the balance of payments before it improves. This is called the
A) J-curve effect. B) time value of money. C) Marshall Lerner condition. D) shock effect.
If the government places a $1500 tax on each hybrid car sold
A) consumers will stop buying hybrid cars. B) the supply curve will shift left by up to $1500, depending on the price elasticity of demand. C) the supply curve will shift to the right by $1500. D) None of the above.
A monopolist is maximizing profit at an output rate of 1,000 units per month. At this output rate, the price that its customers are willing and able to pay is $8 per unit, average total cost is $5 per unit, and marginal cost is $6 per unit
It may be concluded that at this monthly output rate, marginal revenue is A) $5 per unit, and the monopolist earns zero economic profits. B) $6 per unit, and the monopolist earns economic profits of $2,000 per month. C) $6 per unit, and the monopolist earns economic losses of $1,000 per month. D) $6 per unit, and the monopolist earns economic profits of $3,000 per month.