If a Central Bank wishes to reduce the supply of money, it should:
(a) Reduce the reserve requirement.
(b) Raise the reserve requirement.
(c) Instruct banks to reduce their savings rates.
(d) Do all of the above.
Answer: (b) Raise the reserve requirement.
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If the U.S. interest rate differential decreases, then in the foreign exchange market the
A) demand for dollars increases. B) quantity supplied of dollars decreases. C) supply of dollars increases. D) quantity supplied of dollars increases. E) supply of dollars decreases.
A drawback in using the payback approach to capital budgeting decisions is
A) it doesn't account for the time value of money. B) it ignores cash flows beyond the payback period. C) it doesn't adjust for differences in the stream of cash flows. D) All of the above
Suppose a U.S. importer purchases "Mexican Oaxaca" cheese for $500 . If the present exchange rate is Mexican peso (MXP) 10 per U.S. dollar, and the MXP appreciates 10 percent against the U.S. dollar between the date of purchase and the date of payment, then the peso value of the invoice when payment is due is:
a. MXP 500. b. MXP 550. c. MXP 4,500. d. MXP 5,500. e. MXP 4,450.
Allocative efficiency is achieved when
A) firms produce the goods and services that consumers value most.
B) firms produce goods and services at the lowest cost.
C) there are no shortages or surpluses in the market.
D) goods and services are fairly distributed among consumers in an economy.