In a fixed exchange rate system
A. market forces play a role in determining the fixed value of a currency.
B. a central bank affects the value of a currency by changing its foreign exchange reserves.
C. the International Monetary Fund determines exchange rates.
D. market forces and the country's stock of gold determine its exchange rate.
Answer: B
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A bank currently has checkable deposits of $100,000, reserves of $30,000, and loans of $70,000. If the required reserve ratio is lowered from 20% to 15%, this bank can increase its loans by
Refer to Figure 17-3. The shifts shown in the short-run and long-run Phillips curves between period 1 and period 2 could be explained by
A) an increase in the natural rate of unemployment from 5.5 to 6.8 percent. B) an increase in the expected inflation rate from 4.0 to 5.5 percent. C) either an increase in expected inflation from 4.0 to 5.5 percent or an increase in the natural rate of unemployment from 5.5 to 6.8 percent. D) None of the above is correct.
Suppose output is $35 billion, government purchases are $10 billion, desired consumption is $15 billion, and desired investment is $6 billion. Net foreign lending would be equal to
A) -$4 billion. B) -$2 billion. C) $2 billion. D) $4 billion.
Which component of current U.S. GDP under the expenditure approach is most likely to be negative?
a. consumption b. government purchases c. net exports d. investment