What are the differences and similarities between a depreciation and devaluation of a currency?
What will be an ideal response?
A depreciation of a currency takes place due to the mechanics of supply and demand and belongs to a flexible or floating exchange rate system. On the other hand, devaluation is due to the intervention by the monetary authority of a central bank of a country following a fixed exchange rate system. They both result in a lower value of the currency.
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Coase made famous a court case between a doctor and a confectioner. Suppose that exact case happened again and transactions costs were absent. When would we be sure that resources were inefficiently allocated?
a. If the confectioner wins the property right to make his confections. b. If the doctor wins the right to prevent the confectioner from making his confections. c. Zoning laws are changed to prevent the confectioner from manufacturing in the current location. d. The judge forces the parties to bargain until they reach an agreement on who has a right to do what.
Which of the following occurs during an expansion?
a. Output rises, employment rises and unemployment falls. b. Output falls, employment rises and unemployment falls. c. Output rises, employment falls and unemployment falls. d. Output rises, employment rises and unemployment rises. e. Output rises, employment rises and tax revenues fall.
James offers you $1,000 today or $X in 7 years. If the interest rate is 4.5 percent, then you would prefer to take the $1,000 today if and only if
a. X < 1,045.00. b. X < 1,188.89. c. X < 1,266.67. d. X < 1,360.86.
Equilibrium expenditure is defined as the level of aggregate expenditure where...
a) actual aggregate expenditure equals real GDP b) total inventories equal zero c) aggregate planned expenditure equals real GDP d) spending equals output