Assume that there is an excess supply of euros in the foreign exchange market. If a fixed exchange rate system exists with the United States, the European Central Bank would have to __________ to prevent the euro from __________
A) buy excess euros; appreciating
B) buy excess euros; depreciating
C) sell euros; appreciating
D) sell euros; depreciating
B
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Suppose a firm is a natural monopoly. Then, until the long-run average cost curve crosses the demand curve, as the quantity increases the long-run average costs
A) increase. B) decrease. C) decrease and then increase. D) increase and then decrease.
The interest rate the Fed charges on loans to depository institutions is known as
A) the federal funds rate. B) the Fed loan rate. C) the discount rate. D) the interbank clearing rate.
An advantage of capitalism is that
a. It allows the market to self-regulate and clear itself b. It allows a person to follow his or her own self interest c. It allows voluntary transactions, which create wealth d. All of the above
Which of the following mechanisms helps output to return to potential after a demand shock?
a. Change in business mentality b. Change in nominal wage rate c. Large changes in the capital stock d. Inability of the price level to change e. Change in inventories