If a disequilibrium occurs in the foreign exchange market, what are possible solutions? Why might governments choose not to let the price of their currencies adjust to clear the market?
Governments can devalue their currencies, shift the supply and demand curves by buying and selling their own
currencies, ration foreign exchange, or draw on reserves. Governments might be reluctant to let the price rise
or fall because of the uncertainty and the destabilizing effect it has on trade.
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When the economy enters an expansion of a business cycle, households become more optimistic about expected future disposable income. The increase in optimism leads to
A) a shift upward of the consumption function. B) a movement downward along the consumption function. C) no change in the level of consumption expenditures. D) an increase in consumption expenditures. E) a movement upward along the consumption function.
According to Okun's law, if output grew 1% and full-employment output rose 3%, what would be the change in the unemployment rate?
A) -2 percentage points B) -1 percentage point C) 1 percentage point D) 2 percentage points
Which best describes the Federal Reserve district banks?
A) They are private ventures. B) They are government ventures. C) Some are private while others are government. D) They are private-government joint ventures.
DVDs can be produced at a constant marginal cost of $10 per disk, and Roaring Lion Studios is releasing the DVDs for its last two major films. The DVD for Rambeau 17 is priced at $20 per disk, and the DVD for Schreck 10 is priced at $30 per disk
What are the Lerner indices for these two movies? A) Both equal one. B) 2 and 3, respectively C) 0.5 and 0.67, respectively D) 1 and 2, respectively