How did the use of the euro limit the use of monetary policy by European nations severely affected by the Financial Crisis of 2007-2009?
What will be an ideal response?
Before the euro, the central banks of those countries would have responded to the recession by allowing their currencies to depreciate, thereby boosting exports and reducing imports. Each country also could have expanded its monetary base. But these options for fighting recession were no longer available.
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If New England had a Gini coefficient of 0.32 and the Middle Colonies had a Gini coefficient of 0.65, which of the following would be most accurate?
a. The Middle Colonies would have a higher per capita income. b. The Middle Colonies would have a lower per capita income. c. The Middle Colonies would have greater income inequality. d. The Middle Colonies' income was growing faster.
If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar,
a. both the U.S. dollar and the yen have appreciated. b. both the U.S. dollar and the yen have depreciated. c. the U.S. dollar has appreciated and the yen has depreciated. d. the U.S. dollar has depreciated and the yen has appreciated.
Explain why countries with high and volatile inflation rates are likely to have volatile nominal interest rates.
What will be an ideal response?
Suppose there are two firms on a river and the production processes of both require clean water. The upstream firm's process dirties the water, which it dumps back into the river. The downstream firm must clean the water before using it in its production
process. If the two firms would merge A) the external costs of the merged firm would equal the external costs of the upstream firm, which would then be passed on to its customers. B) the total costs of production fall since the external costs disappear. C) the external costs of the upstream firm are private costs after the merger. D) the internal costs of the downstream firm become external costs of the merged firm.