How does a rise in the foreign exchange rate affect aggregate demand in the United States? Explain your answer
What will be an ideal response?
An increase in the foreign exchange rate decreases U.S. aggregate demand. The foreign exchange rate is the amount of a foreign currency that a dollar can buy. If the exchange rate rises, a dollar buys more foreign currency. As a result, foreign goods and services become cheaper to U.S. citizens because U.S. citizens need to spend fewer dollars to buy foreign-produced goods and services. Simultaneously, U.S.-produced goods and services become more expensive to foreigners because they must spend more of their currency in order to buy the dollars necessary to buy the U.S.-produced goods and services. As a result, U.S. imports increase and U.S. exports decrease, both of which decrease U.S. aggregate demand.
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The telephone is an example of a product with network externalities
What will be an ideal response?
The bowed-out-from-the-origin shape of the production possibilities curve occurs because resources are
a. equally well-suited to production of both goods b. not being used efficiently c. not always of equal quality and some are better suited to the production of one type of good than others d. increasing as more of one good is produced e. of an increasingly inferior quality
Normally, exchange rates are expressed as:
a. the number of units of the currency per one ounce of gold. b. the GDP of one nation as a percentage of the GDP of the other. c. the price of one unit of foreign currency expressed in terms of the domestic currency. d. ratios of the value of one nation's wealth compared to the other.
Bobbie is contemplating buying a lottery ticket for $1 that has a 1 percent chance of paying $100. What is Bobbie's average expected rate of return on this "investment?"
A. Practically zero percent. B. 1 percent. C. 50 percent. D. $1.