In 1990, Britain joined the ERM. If the German Bundesbank increased interest rates, assuming Britain does not maintain its exchange rate peg:
A) the only option available to Britain would be to increase its interest rate.
B) the British pound would depreciate.
C) the British pound would appreciate.
D) the British economy would slow down.
Answer: B) the British pound would depreciate.
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With respect to labor supply, the substitution effect means a
A) person increases his or her hours of labor in response to a higher wage rate. B) person decreases his or her hours of labor in response to a higher wage rate. C) person substitutes high paying work for low paying work. D) firm substitutes capital for labor.
The "corporate takeover market" plays a part in handling the conflict between management and __________ in __________-oriented financial systems
A) bankers; markets B) bankers; banking C) stockholders; markets D) stockholders; banking
According to Adam Smith's invisible hand
A) markets need the government to intervene. B) forces are constantly pushing markets out of equilibrium C) people coordinate their activities, resulting in equilibrium in the market. D) there is an invisible glove that restricts what markets can do.
Which of the following statements is true for the two countries illustrated in Figure 35.1?
A. Japan has an absolute advantage in motorcycles, the United States in DVD players. B. Japan has an absolute advantage in motorcycles. C. The United States has a comparative advantage in DVD players. D. The United States has a comparative advantage in motorcycles, Japan in DVD players.