Is it possible for a country to run a trade deficit and yet have the value of its currency not change? Use a supply and demand model of a foreign exchange market to explain how this could occur.
What will be an ideal response?
A trade deficit means that the country is importing more than it is exporting, which means a decreased demand for its currency and a depreciation of the currency; the exchange rate falls. However, the country's assets may be attractive to foreign investors. This would increase the demand for the currency, and if this upward pressure is strong enough to balance the downward pressure, the exchange rate may not change. In fact, based on which effect is stronger, the exchange rate might decrease or even increase.
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The above table gives information for the nation of North Hampton. There are no imports to or exports from North Hampton
a. Find aggregate planned expenditure for each level of real GDP. b. What is the equilibrium level of real GDP?
A good may be inferior at some income levels and normal at others
What will be an ideal response?
Most of the Fed's liabilities are in the form of: a. Federal Reserve notes. b. checkable deposits
c. U.S. Treasury deposits. d. loans to member banks. e. certificates of deposit.
An increase in the long-run aggregate supply curve indicates that
a. the natural rate of unemployment has increased. b. unemployment has increased. c. the general level of prices has increased. d. potential real GDP has increased.