Suppose a decline in U.S. income causes Americans to decrease their demand for all normal goods, including those produced in Europe. How will this change affect the foreign exchange market?
a. A decrease in U.S. income will increase the U.S. demand for foreign exchange, thus increasing the dollar-per-euro exchange rate, making European goods more expensive to U.S. residents.
b. A decrease in U.S. income will decrease the U.S. demand for foreign exchange, thus decreasing the dollar-per-euro exchange rate, making European goods cheaper to U.S. residents.
c. A decrease in U.S. income will decrease the U.S. supply of foreign exchange, thus increasing the dollar-per-euro exchange rate, making European goods cheaper to U.S. residents.
d. A decrease in U.S. income will increase the U.S. supply of foreign exchange, thus increasing the dollar-per-euro exchange rate, making European goods expensive to U.S. residents.
b
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The addition of government to the circular-flow model illustrates that government
A. purchases goods in the product market. B. provides services to businesses and households. C. purchases resources in the resource market. D. does all of these.
Suppose that if a local McDonald's restaurant reduces the price of a Big Mac from $4.00 to $3.25, the number of Big Macs it sells per day will increase from 4 to 5. Explain the output effect and the price effect resulting from this change
Using a graph, illustrate both the loss in revenue from selling each of the first 4 Big Macs for $0.75 less and the additional revenue from selling 1 more Big Mac. What is the total change in revenue received which results from this price decrease?
The higher the expected inflation, _____
a. the higher the nominal rate of interest that lenders require and that borrowers are willing to pay b. the lower the nominal rate of interest that lenders require and that borrowers are willing to pay c. the higher the nominal rate of interest that lenders require and the lower the nominal rate of interest that borrowers are willing to pay d. the higher the real interest rate that lenders require e. the higher the real interest rate that borrowers are willing to pay
A fractional reserve banking system:
A. prevents the Federal Reserve from influencing the money supply. B. prevents money creation through the lending process. C. only tends to exist in developing economies. D. is susceptible to bank panics.