In the figure above, suppose the demand for dollars temporarily decreases so that the demand curve shifts to D2. To maintain the target exchange rate, the Fed
A) can sell dollars.
B) can buy dollars.
C) must violate both interest rate parity and purchasing power parity.
D) cannot maintain the target exchange rate.
B
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This Application addresses the idea that
A) imports ultimately have a positive impact on all communities. B) imports have a bigger impact on some communities than on others. C) imports are only beneficial to a community if they are equally matched by exports from that community. D) imports have an equal impact on all communities.
Suppose a university raises its tuition by 6 percent and as a result the enrollment of students decreases by 3 percent. The absolute value of the price elasticity of demand is
A. 0.5. B. 8.0. C. 6.0. D. 2.0.
monetary policy is conducted
What will be an ideal response?
A decrease in U.S. federal government budget deficits that lowers U.S. interest rates relative to the rest of the world should
A) decrease net exports. B) increase foreign portfolio investment. C) lead to a current account surplus. D) lower the trade balance. E) cause the dollar to appreciate.