All of the following are true regarding flexible exchange rates except
A. Speculators typically push exchange rates away from the long-term equilibrium.
B. Exchange rate movements alter relative prices and may disrupt import and export flows.
C. The quantity of foreign exchange demanded equals the quantity supplied.
D. Some people are hurt while others are helped by exchange rate movements.
Answer: A
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A. less than the recipient’s income. B. equal to the recipient’s income. C. greater than the recipient’s spending. D. offset by another individual’s saving.
If interest rates in the European Union decrease
A) the demand for U.S. dollars will fall in the foreign exchange market. B) the supply of U.S. dollars will fall in the foreign exchange market. C) the demand for euros will fall in the foreign exchange market. D) nothing will change in the foreign exchange market.
A store is choosing between advertising a credit card fee or a discount for paying cash to its customers. People will care more about:
A. getting the discount rather than avoiding the fee. B. avoiding the fee rather than getting the discount. C. neither; since it's the same outcome, people won't care one way or another. D. It is impossible to say without more information.
"Plowback" is that portion of corporate profits used to
a. invest in future activities of the corporation. b. advertise the company's product. c. buy back bonds (reduce debt). d. pay owners for the use of their capital.