The demand for euros in the foreign exchange market equals 8,000 - 2,000 e and the supply of euros in the foreign exchange market equals 3,000 + 3,000 e, where e is the nominal exchange rate expressed in U.S. dollars per euro. If the euro is fixed at 0.85 U.S. dollars per euro, then the euro is ________ and Euroland has a balance-of-payments ________.
A. overvalued; deficit of 750 euros
B. overvalued; surplus of 750 euros
C. undervalued; surplus of 750 euros
D. undervalued; deficit of 750 euros
Answer: C
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Suppose the Fed announced that it has chosen to accept a temporary period of above-target inflation. Assuming that the announcement is seen as credible, this will tend to increase inflationary expectations, which will result in
A) the AD curve shifting to the right. B) the AD curve shifting to the left. C) the AS curve shifting to the right. D) the AS curve shifting to the left.
Both Keynesians and real business cycle proponents believe that tax cuts increase output
a. and both agree it does this through increasing aggregate demand. b. but Keynesians believe it does this through increasing aggregate demand and not aggregate supply. c. but Keynesians believe it does this through increasing aggregate supply and not aggregate demand. d. and both agree it does this through increasing aggregate supply.
Describe the difference between the Economic Value Added (EVA) and the Market Value Added (MVA) approach to determining stockholder wealth
What will be an ideal response?
As long as the marginal utilities per dollar obtained from the last unit of all products consumed are the same, _____
a. the consumer is in equilibrium and will not reallocate income b. the consumer is not in equilibrium and will reallocate income c. the consumer is most likely operating a budget deficit d. the consumer is not maximizing utility e. the government will recognize this as an intolerable disequilibrium and will most likely intervene by imposing a tax and reallocate the consumer's income