What are the pros and cons of a currency board?
What will be an ideal response?
With a currency board, the central bank's only job is to maintain the exchange rate. While that means that policymakers cannot adjust monetary policy in response to domestic economic shocks, the system does have its advantages. Prime among them is control of inflation. Forgoing the ability to stabilize domestic growth seems like a small price to pay for such control in countries that have been prone to severe inflation. However, another drawback of a currency board is that the central bank loses its role as the lender of last resort to the domestic banking system.
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Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. The lemonade market in Jenny's neighborhood is more likely to be perfectly competitive if:
A. each lemonade stand sells the same kind of lemonade. B. some of the neighborhood parents build elaborate booths for their kids' stands while some kids sell from makeshift tables. C. each stand tries to get more customers by offering different varieties of lemonade and snacks. D. all of the kids advertise heavily.
Technological advancements that increase labor's productivity shift the labor supply curve to the right
Indicate whether the statement is true or false
A tax wedge:
A. refers to the difference in the price the buyer pays and the price the seller keeps. B. only occurs in markets when the tax is placed on sellers. C. only occurs in markets when the tax is placed on buyers. D. only occurs in markets when taxes are placed on large corporations.
If a tax is levied on the sellers of a product, then there will be a(n)
a. downward shift of the supply curve. b. upward shift of the supply curve. c. decrease in quantity supplied. d. increase in quantity supplied.