Suppose the government of South Island has fixed the value of its currency, the Islandia, at $0.50 per Islandia, but the market equilibrium value of the Islandia is $0.75 per Islandia. In order to maintain the official value of the Islandia the Central Bank of South Island must either ________ domestic interest rates or supply Islandia, which causes the supply of international reserves to ________.
A. raise; decrease
B. lower; increase
C. lower; decrease
D. raise; increase
Answer: B
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Draw a graph of a market in equilibrium. Describe what might cause a change in demand or supply and how this would affect the diagram. Indicate how the equilibrium price and quantity will change.
What will be an ideal response?
In the late 18th century, England:
a. passed laws prohibiting the export of new industrial machinery. b. tried to discourage labor pirating. c. was the second largest producer of manufactured goods in the world. d. successfully prevented technology transfer to the U.S. e. Both a and b are correct.
Game theory is best suited to analyze the pricing behavior of:
A. pure monopolists. B. pure competitors. C. monopolistic competitors. D. oligopolists.
Refer to the table. The interest-rate effect of changes in the price level is shown by columns:
Answer the question on the basis of the following table for a particular country in which C is
consumption expenditures, I g is gross investment expenditures, G is government expenditures,
X is exports, and M is imports. All figures are in billions of dollars. Each question is
independent of other question using the same table, unless otherwise stated.
A. (1) and (4) of the table.
B. (5) and (6) of the table.
C. (1) and (3) of the table.
D. (2) and (4) of the table.