If the exchange rate between two countries is expected to remain fixed at its current rate, then
A) output growth rates must be equal in the two countries.
B) price levels must be equal in the two countries.
C) inflation rates must be equal in the two countries.
D) nominal interest rates must be equal in the two countries.
E) none of the above
D
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Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 50 per day. If Atlantis produces only kayaks, it can make 75 per day
If Pacifica produces only surfboards, it can make 75 per day. If Pacifica produces only kayaks, it can make 75 per day. After trade begins, ________ will specialize in the production of surfboards and ________ will specialize in the production of kayaks. A) Atlantis; Pacifica B) Pacifica; Atlantis C) Atlantis; Atlantis D) Pacifica; Pacifica
A Keynesian economist believes that
A) if the economy was left alone, it would rarely operate at full employment. B) the economy is self-regulating and always at full employment. C) the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic. D) the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic.
Refer to Figure 14-2. If the government delays Gigacom's entry and Xenophone moves first, is a threat by Gigacom that it will provide DSL service if Xenophone provides cable service a credible threat?
A) No, because Gigacom will lose $4.5 million in profits if it carries out its threat. B) Yes, Xenophone stands to lose $3 million in profit. C) Yes, because Gigacom's DSL service will drive Xenophone out of business. D) No, because as a second mover, it has no choice but to abide by the choices of the first mover.
If the economy is on the IS curve, but is to the left of the LM curve, aggregate output will ________ and the interest rate will ________
A) rise; rise B) rise; fall C) fall; rise D) fall; fall