A rise in interest rates tends to contract the economy by appreciating the currency and reducing net exports. Provide the reasoning behind this conclusion
Interest rate differentials and capital flows are typically the most important determinants of exchange rate movements. Suppose interest rates in the United States rise while foreign interest rates remain unchanged. This change in relative interest rates will attract capital to the United States and cause the dollar to appreciate. An appreciating dollar will, in turn, reduce net exports, prices, and output in the United States.
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The change in the consumption of one good that just offsets a one-unit change in the consumption of another good is the
A) marginal utility. B) marginal rate of consumption. C) marginal rate of substitution. D) marginal rate of satisfaction.
Inflation ________ the signals sent by price changes to demanders and suppliers of goods and services.
A. has no impact on B. amplifies C. enhances D. obscures
An increase in the exchange rate of the U.S. dollar relative to a trading partner can result from
a. higher anticipated costs of production in the U.S. b. higher interest rates and higher inflation in the U.S. c. higher growth rates in the trading partner's economy d. a change in the terms of trade e. lower export industry productivity
Suppose that MU x /P x exceeds MU y /P y . To maximize utility, the consumer who is spending all her money income should buy:
A. less of X only if its price rises. B. more of Y only if its price rises. C. more of Y and less of X. D. more of X and less of Y.