Which of the following is true of a system of fixed exchange rates adopted by many countries?
A. The goals and policies can differ substantially across the countries.
B. The relative stability can promote higher levels of international trade.
C. For each of these countries, monetary policy can be a powerful policy tool in managing aggregate demand.
D. The countries will have large differences in their inflation rates.
Answer: B
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At its present rate of output, Barrel O' Biscuits, a perfectly competitive firm, finds that its marginal cost exceeds its marginal revenue and price exceeds average variable cost. To maximize profit, the firm should
a. lower the price b. raise the price c. increase output d. reduce output e. maintain its current rate of output
Suppose the real wage of a worker remains unchanged between Year 1 and Year 2 but the nominal wage decreases from $20 in Year 1 to $18 in Year 2 . This implies that the price level has: a. increased by 20 percent. b. increased by 25 percent. c. remained unchanged
d. fallen by 10 percent. e. fallen by 20 percent.
Which of the following statements best describes the neoclassical argument about unemployment and inflation?
a. Neoclassical economists argue that any short-term gains in lower unemployment will eventually vanish and the result of active policy will only be inflation. b. Neoclassical economists argue that any long-term gains in lower unemployment will eventually vanish and the result of active policy will only be inflation. c. Neoclassical economists argue that any short-term gains in lower unemployment will eventually vanish and the result of active policy will only be deflation. d. Neoclassical economists argue that any long-term gains in lower unemployment will eventually vanish and the result of active policy will only be deflation.
Suppose that a country has $120 billion of national saving, and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national savings go?