Refer to Figure 19-8. The equilibrium exchange rate is at A, $1.25/euro. Suppose the European Central Bank pegs its currency at $1.00/euro. Speculators expect that the value of the euro will rise and this shifts the demand curve for euro to D2
After the shift,
A) there is a surplus of euros equal to 400 million.
B) there is a surplus of euros equal to 500 million.
C) there is a shortage of euros equal to 800 million.
D) there is a shortage of euros equal to 1,000 million.
C
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An option buyer has limited loss potential (premium paid) and unlimited gain potential.
a. true b. false
Suppose Congress increases the corporate profit tax rates. This is an example of
A) discretionary fiscal policy of the expansionary variety. B) automatic fiscal policy of the expansionary variety. C) discretionary fiscal policy of the contractionary variety. D) automatic fiscal policy of the contractionary variety.
Economists do not include every minute detail in models because:
a. complicated models are always faulty. b. as long as the model serves its purpose, it does not need to include every detail. c. simple models are always better. d. critical assumptions help to eliminate non-conclusion affecting details.
In the above table, between what two levels of output does one first observe the law of diminishing returns?
A) 0 and 1000 B) 1000 and 3000 C) 3000 and 4000 D) 4000 and 4500