Refer to Figure 12.6. Under a fixed exchange rate system, the central bank cannot increase the output gap with expansionary policy and still maintain the fixed exchange rate if the economy is at
A) point A.
B) point B.
C) point C.
D) point X.
B
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Why do governments want to maintain the health of the banking system?
What will be an ideal response?
Alpha can produce either 18 tons of oranges or 9 tons of apples in a year, while Omega can produce either 16 tons of oranges or 4 tons of apples. The opportunity costs of producing 1 ton of apples for Alpha and Omega, respectively, are: a. 0.25 tons of oranges; 0.5 tons of oranges. b. 9 tons of oranges; 4 tons of oranges
c. 2 tons of oranges; 4 tons of oranges. d. 4 tons of oranges; 2 tons of oranges.
According to Olson the stationary bandit will be interested in growth and welfare:
a. True b. False
Whenever a nation's currency is expected to depreciate because of various market conditions, the following situation exists regarding its forward rate for another currency:
a. there is a forward discount from the spot rate by the rate of depreciation. b. there is a forward premium from the spot rate by the rate of depreciation. c. there is no difference between the spot and forward rates. d. there is no predictable relationship between the spot and forward rates