Suppose that Mexico and Canada both peg their currencies to the U.S. dollar. The relationship between the Mexican peso and the Canadian dollar is best described as a(n):
A) indirect peg.
B) fixed exchange rate system.
C) currency union.
D) free trade area.
Ans: A) indirect peg.
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During the 1990s, Japan experienced periods of deflation and nominal interest rates that approached zero percent. Why would anyone lending money agree to a nominal interest rate of almost zero percent?
What will be an ideal response?
An example of an entrepreneur would be
A) the owner of a new Indian food restaurant. B) the cafeteria employee who won the employee of the month award. C) a Greyhound bus driver. D) the cashier at your local supermarket.
The marginal factor cost of borrowing $1,000 for new equipment when the interest rate is 10 percent and the MRP is $700 is
a. $1,000 b. $700 c. $100 d. $70 e. $0 since the firm won't borrow $1,000 when the MRP is only $700
Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2, who can see what Player 1 has chosen, must choose Up or Down at B or C. Both players know the payoffs at the end of each branch.
What is the equilibrium outcome of this game?
A. Player 1 and Player 2 both choose Down. B. Player 1 chooses Up and Player 2 chooses Down. C. Player 1 chooses Down and Player 2 chooses Up. D. Player 1 and Player 2 both choose Up.