An important factor in the choice of an exchange rate regime in low-income nations is:
A) the credentials of the finance minister.
B) the extent of liability dollarization, which can cause contractions when the home currency depreciates.
C) how dependent the nation is on imports, which must be financed by external borrowing.
D) the price level and how it affects the interest rate level in the nation.
Ans: B) the extent of liability dollarization, which can cause contractions when the home currency depreciates.
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Economic theory
A. is a deliberate simplification of factual relationships. B. seeks to disprove a hypothesis. C. is based mainly on assumptions. D. seeks to prove political ideals.
The idea that the production function exhibits _______implies that ________
A) increasing returns; output should increase steadily as technology grows B) constant returns; each additional unit of labor employed generates an increasing amount of real GDP C) diminishing returns; the Lucas Wedge increases at output increases D) increasing returns; potential GDP is always increasing E) diminishing returns; each additional unit of labor employed generates an ever-decreasing amount of real GDP
According to the textbook, which of the following methods for coordinating the supplies and demands for scarce goods tends to work best to enhance the freedom and power of people who want the goods?
A) A lottery B) Equal shares for all C) First come, first served D) Highest money bid E) Might makes right
The production contract curve:
A. shows every efficient allocation of inputs between two firms in an Edgeworth box. B. shows every efficient allocation of consumption goods in an Edgeworth box. C. passes through the intersections between all pairs of isoquants in an Edgeworth box. D. passes through the intersections between all pairs of indifference curves in an Edgeworth box.