Explain and show graphically the effect of an increase in the expected future exchange rate on the equilibrium exchange rate, everything else held constant
What will be an ideal response?
See figure below.
When the expected future exchange rate increases, the relative expected return on the domestic assets increases. This will cause the demand for domestic assets to increase and the current value of the exchange rate will appreciate.
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The government is considering levying a tax on the pollution generated from two electric power plants (Plant A and Plant B)
Plant A is located in a city with a high density of population, and Plant B is located in the rural area with a low density of population. The government should A) levy the same tax per unit of pollution on both plants. B) levy a higher tax per unit of pollution on Plant A because of its higher economic damage. C) levy a higher tax per unit of pollution on Plant B because of its lower economic damage. D) tax only Plant A but not Plant B because Plant B generates less revenue.
Suppose roses are currently selling for $30 per dozen, but the equilibrium price of roses is $20 per dozen. We would expect a
a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease.
What is "monopolistic" about monopolistic competition?
What will be an ideal response?
A balance of payments deficit occurs when:
A. exports exceed imports. B. the supply of a nation's currency exceeds the demand for the currency at the current exchange rate. C. the demand for a nation's currency exceeds the supply of the currency at the current exchange rate. D. the supply of a nation's currency is equal to the demand for the currency at the current exchange rate.