Illustrate with a graph the effects of monetary policy on the economy when exchange rates are flexible
What will be an ideal response?
Assume perfect asset substitutability and capital mobility, so the BP curve is horizontal. Shifts in LM will be matched by shifts in IS so that income changes but the interest rate is fixed.
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A perfectly contestable market is one in which there are excessive costs to entry and exit.
Answer the following statement true (T) or false (F)
A supply curve shows the relationship between:
A) output and the total cost of production. B) output and prices. C) output and consumer income. D) output and revenue.
In the table above, the market is in equilibrium. Then a minimum wage is set at $11 per hour. The number of unemployed workers will be
A) 0. B) 2 million. C) 4 million. D) 6 million.
If a $10,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity is
A) 5 percent. B) 10 percent. C) 50 percent. D) 100 percent.