A . What are foreign exchange reserves? b. What actions can a government take if it exhausts its foreign exchange reserves?
a . Foreign exchange reserves are a government's holdings of foreign currencies used to support its own
currency's exchange rate at a fixed level.
b. It can devaluate its currency. This lowers the nation's exchange rate, making its currency worth
less in the foreign exchange market. It can impose import controls in order to shift the economy's
demand curve to the left in order to reach an equilibrium exchange rate equal to the fixed exchange
rate. It can impose exchange controls, whereby exporters must turn their foreign exchange over to the
government at the fixed exchange rate. Finally, it can borrow enough currency from the IMF to cover
the country's excess demand for that currency.
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A natural oligopoly can form
A) if there are economies of scale. B) only if firms sell a differentiated good. C) only if firms sell a homogeneous good. D) if there is only one firm in the industry.
Most people who earn the minimum wage are poor
Indicate whether the statement is true or false
The slope of the budget line is equal to the ratio of:
a. marginal utilities. b. money income to the price of the good on the horizontal axis. c. money income to the price of the good on the vertical axis. d. price of the good on the horizontal axis to the price of the good on the vertical axis.
Usury laws typically regulate
a. interest rates paid on savings. b. interest rates charged on loans. c. rents charged on land. d. economic rent earned in all factor markets.