What is a flexible exchange rate and how does it work?
What will be an ideal response?
A flexible exchange rate policy is an exchange rate that is determined by demand and supply with no direct intervention in the foreign exchange market by the central bank. In this arrangement, the forces of supply and demand with no direct central bank intervention are the only factors that influence the exchange rate.
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If a project costs $600 today and returns $630 next year, the highest interest rate at which the project should still be undertaken is five percent
Indicate whether the statement is true or false
If interest rates in the United States rise,
A) the value of the dollar will rise as the foreign investors increase their holdings of U.S. investments. B) the value of the dollar will fall as foreign investors increase their holdings of U.S. investments. C) the value of the dollar will rise as foreign investors sell their U.S. investments. D) the value of the dollar will fall as foreign investors sell their U.S. investments.
Asymmetric information means
A) some market participants have more information than others. B) some news are more important than others. C) some market participants interpret news differently. D) the impact of news on economic outcomes depends on the context.
Prohibiting price increases in situations of true scarcity could best be described as
a. interfering with the "law" of supply and demand. b. thwarting the "law" of increasing returns to scale. c. violating the "law" of increasing cost. d. interfering with the "law" of diminishing marginal utility.