Suppose the governments of Mexico and the United States agree to a fixed exchange rate. Describe some of the options available to the Mexican government if the peso was persistently overvalued, creating a surplus of pesos on the foreign exchange market. Be sure to explain how each of these options would be expected to impact the supply and/or demand for Mexican pesos
The Mexican government could buy pesos (and sell dollars) which would increase the demand for pesos. The Mexican central bank could increase interest rates which would motivate some investors to purchase Mexican bonds, thereby increasing the demand for pesos. The government could increase trade restrictions on goods imported into Mexico from the United States, which would decrease the demand for dollars (and thus decrease the supply of pesos). A final solution might be for the Mexican government to devalue the peso.
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With peak-load pricing, a firm
A) charges more for a good during periods of high demand. B) charges more for a hotel room the higher up the mountain it is. C) charges less for a good during periods of high demand, because of regulatory reasons. D) is generally used during January and February.
Which of the following increases the chance of Americans accumulating a large amount of wealth during their lifetimes?
a. Starting to save money early in life b. Investing in the stock market c. Paying bills with cash d. Graduating from high school
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and net nonreserve international borrowing/investing in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and net nonreserve international borrowing/investing becomes more positive (or less negative). b. The real risk-free interest rate falls and net nonreserve international borrowing/investing becomes more negative (or less positive). c. The real risk-free interest rate rises and net nonreserve international borrowing/investing becomes more negative (or less positive). d. The real risk-free interest rate and net nonreserve international borrowing/investing remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
Economists at the U.S. Department of the Treasury help design U.S. coins and paper money
a. True b. False Indicate whether the statement is true or false