How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market
What will be an ideal response?
An increase in government purchases financed by an increase in the deficit will reduce the supply of loanable funds, thereby increasing the interest rate. The increase in the interest rate will increase the demand for dollars (as capital inflows increase) and reduce the supply of dollars (as capital outflows decrease). Both the increase in the demand for dollars and the decrease in the supply of dollars will increase the equilibrium exchange rate, as shown below.
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Involuntary transfers are the type of transfers used in the case against government
Indicate whether the statement is true or false
Monopolists are like perfectly competitive firms in that ______.
a. both maximize profits at the output level where marginal revenue equals marginal cost b. both could be earning either profits or losses in the short run c. both are in industries with downward-sloping demand curves d. all of these are true of both of them e. both maximize profits at the output level where marginal revenue equals marginal cost and both could be earning either profits or losses in the short run are true of both of them, but not both are in industries with downward-sloping demand curves
What are the four main limitations of GDP accuracy?
(D) Depreciation, price level, distortion, and underground economy. (B) Nonmarket activities, underground economy, negative externalities, and quality of life. (C) Durable good, nondurable good, black market, and negative externalities. (D) Trough, peak, recession, and depression.
Refer to Scenario 9.8 below to answer the question(s) that follow. SCENARIO 9.8: Investors put up $1,040,000 to construct a building and purchase all equipment for a new gourmet cupcake bakery. The investors expect to earn a minimum return of 10 per cent on their investment. The bakery is open 52 weeks per year and sells 900 cupcakes per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The bakery charges $8 on average per cupcake.Refer to Scenario 9.8. The bakery is making ________ economic profits per week.
A. break-even B. zero C. positive D. negative