Which of the following is CORRECT?
a. If a nation changes its money supply, it disrupts the long-run PPP equilibrium, which causes traders to purchase in the cheaper markets and sell in the pricier markets, which, in turn, causes demand for the domestic currency (vis-a-vis the international currency) to be lower.
b. The peg changes the long-run expectation of exchange rates, and this is a determinant of short-run rates which, in turn, affect deposit rates of return.
c. The Federal Reserve has complete control of monetary policy; it is independent of political control, so,in the United States at least, monetary policy can coexist with an exchange rate peg.
d. Pegging its own currency causes a nation to lose political control, and it is then forced to sell its own resources at world prices
Answer: a. If a nation changes its money supply, it disrupts the long-run PPP equilibrium, which causes traders to purchase in the cheaper markets and sell in the pricier markets, which, in turn, causes demand for the domestic currency (vis-a-vis the international currency) to be lower
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Refer to the production possibilities frontier in the figure above. More of good X must be given up per unit of good Y gained when moving from point b to point a than when moving from point c to point b. This fact
A) illustrates decreasing opportunity cost. B) illustrates increasing opportunity cost. C) indicates that good X is more capital intensive than good Y. D) indicates that good Y is more capital intensive than good X.
The leverage ratio of an investment firm refers to
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Antitrust action restructures a previously monopolized industry into a competitive industry. If economies of scale are unimportant in the industry, the expected result of this movement from monopoly to competition is
a. a reduction in output and an increase in price in the industry. b. a reduction in both price and output in the industry. c. an increase in both price and output in the industry. d. an increase in output and a reduction in price in the industry.
Fundamental analysis shows that stock in Stainless Appliance Company has a present value below its price
a. This stock is overvalued; you should consider adding it to your portfolio. b. This stock is overvalued; you shouldn't consider adding it to your portfolio. c. This stock is undervalued; you should consider adding it to your portfolio. d. This stock is undervalued; you shouldn't consider adding it to your portfolio.