Suppose that Argentina's dollar-denominated external assets and liabilities are $10 billion and $100 billion, respectively, and its Argentine peso-denominated external assets and liabilities are each 50 billion pesos (P). Suppose further that Argentina fixes its exchange rate at P1 = $US1. What is the likely effect of the change in Argentina's external wealth on Argentine aggregate demand as a result of the devaluation of the peso (from P1 = $US1 to P3 = $US1)?
A) It will increase Argentine aggregate demand.
B) It will decrease Argentine aggregate demand.
C) It will neither increase nor decrease Argentine aggregate demand.
D) It will first increase, then decrease Argentine aggregate demand.
Ans: B) It will decrease Argentine aggregate demand.
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A) increase at an increasing rate. B) increase at a decreasing rate. C) decrease at an increasing rate. D) decrease at a decreasing rate.
Monetarists believe that:
a. velocity is constant. b. velocity is highly predictable. c. there are three motives for demanding money. d. changes in the money supply cause changes in velocity. e. a change in the money supply can affect real GDP.
Jimmy's Bakery has an absolute advantage in producing bagels. Which of the following is true of the bakery? a. It produces bagels at a lower opportunity cost than other bakeries
b. It uses more inputs in the production of bagels than other bakeries. c. It is able to produce bagels at a lower production cost than other bakeries. d. It experiences diseconomies of scale in the production of bagels.
Which of the following most accurately summarizes the implications of an economy's production possibilities curve?
A. If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. B. If all the resources of an economy are being used efficiently, it is generally possible to produce more of one good without having to sacrifice the production of other goods. C. Over time, it is generally impossible for a country to expand its production of goods. D. An economy will automatically move toward a point that lies outside of the production possibilities constraint unless proper government policy constrains production.