Exchange rate overshooting occurs
A. because product prices are sticky in the short run.
B. only if investors and speculators react irrationally to any change in the monetary policies of the domestic or the foreign government.
C. because interest rates are sticky.
D. when one of the nations has a very high rate of inflation.
Answer: A
You might also like to view...
A trough in the business cycle occurs when
A. the inflation rate is at its lowest level. B. the natural rate of unemployment is at a minimum point. C. cyclical unemployment is at a minimum point. D. employment and output reach their lowest levels.
Which of the following is a variable in the equation of exchange?
A) real GDP. B) the velocity of money. C) the money supply. D) the price level. E) all of the above.
The AK growth model indicates that countries with high saving rates experience ________, and countries with low saving rates experience ________
A) high growth rates; low growth rates B) low growth rates; high growth rates C) positive growth rates; no growth D) negative growth rates; positive growth rates
One way the government can boost the economy out of a recession is:
A. with public announcements telling the public to save their money. B. by increasing government spending. C. by setting price ceilings on most goods so people can afford them. D. None of these will help an economy in recession.