When there is a permanent fall in the domestic money supply, the exchange rate:
a. falls in the short run and rises slightly in the long run.
b. falls in the short run and falls more in the long run.
c. rises in the short run and falls slightly in the long run.
d. rises in the short run and rises more in the long run.
Answer: a. falls in the short run and rises slightly in the long run.
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Rent controls and controls on other prices often aggravate the very problem they are intended to solve.
Answer the following statement true (T) or false (F)
There is an externality present only when
A) private costs equal social benefits. B) private benefits equal social benefits. C) private costs or benefits diverge from social costs or benefits. D) private costs equal social costs.
Suppose the official unemployment rate is 10 percent. Which of the following is a definite conclusion to draw?
What will be an ideal response?
Refer to the diagram in which S is the market supply curve and S 1 is a supply curve comprising all costs of production, including external costs. Assume that the number of peopleaffected by these external costs is large. If the government wishes to
establish an optimal allocation of resources in this market, it should:
A. not intervene because the market outcome is optimal.
B. subsidize consumers so that the market demand curve shifts leftward.
C. subsidize producers so that the market supply curve shifts leftward (upward).
D. tax producers so that the market supply curve shifts leftward (upward).