Laissez-faire economists believe:
A. government policies are largely ineffective in coordinating economic activity.
B. government intervention in the market is necessary for a smoothly operating economy.
C. most government policies would probably make things worse.
D. government can implement policy proposals that have mostly positive impacts on the economy.
Answer: C
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Other things constant, a rise in which of the following would tend to increase the nominal interest rate?
A) The rate of time preference B) The risk premium C) The expected rate of inflation D) Any of the above.
Which of the following would most likely be considered complements?
A) butter and margarine B) rental cars and taxis C) plastic wrap and aluminum foil D) tennis rackets and tennis balls
Suppose the Canadian government agrees to establish an official exchange rate at which 1$ Canadian is equal to $0.925 U.S. Now suppose the demand for the Canadian dollar increases as more Americans travel to Canada causing the demand curve for Canadians dollars to shift to the right as shown in Figure (a). If the Canadian government wishes to maintain the official exchange rate then it must increase the supply of its currency as shown in Figure (b) by
a. selling U.S. dollars.
b. buying U.S. dollars.
c. restrict the amount of Canadian dollars in foreign exchange markets.
d. Any of the above.
Under a floating exchange-rate regime, the domestic currency will normally depreciate if the money supply
A. contracts. B. is managed to keep the country's inflation rate steady. C. expands. D. does not change with the change in the exchange rates.