A decrease in the price level in an economy will
What will be an ideal response?
increase the real value of dollar-denominated assets
"A decrease in the price level in an economy increases the real value of money holdings, increases consumption spending, shifts the aggregate expenditure line upward, and increases the real GDP demanded along the aggregate demand curve. "
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Assume that the U.S. interest rate is 5%, the European interest rate is 2%, and the future expected exchange rate in one year is $1.224. If the spot rate is $1.24, then the expected dollar return on euro deposits is:
a. 4% b. 7.1% c. 0.71% d. 0.129%
There are several conditions that justify limiting imports to ensure the survival of the "infant industry," and to justify government protection. Which of the following is(are) a justification?
I. Knowledge spillovers should be likely. II. Protected firms should have a good chance of moving down along their average cost curves over time to become competitive at world prices. III. Protected firms should have a good chance to reduce future costs and cause their average cost curves to shift downwards. a. I b. II c. I and III d. I, II, and III
Any amount that a bank chooses to keep on hand beyond what it is required to is called:
A. extra holdings. B. excess reserves. C. federal funds. D. excess deposits.
Retained earnings are
A. Direct increases to shareholder wealth. B. The amount of corporate profit not paid out in dividends. C. The only motive for purchasing stock. D. Equal to corporate profits.