Explain how the Fed intervenes in the foreign exchange market and what the effects are of the Fed's actions
What will be an ideal response?
The Fed changes the value of the exchange rate by buying or selling dollars in the foreign exchange market. If the Fed deems it necessary to appreciate the exchange rate (raise the exchange rate) it will buy dollars. By so doing it increases the demand for dollars and thereby raises the exchange rate. If the Fed wants to depreciate the exchange rate (lower the exchange rate) the Fed will sell dollars. By selling dollars the Fed will increase the supply of dollars and lower the exchange rate.
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Pleasure boaters enjoy the use of waterways, but sometimes run into problems and need rescue. Coast Guard boats, supported by tax revenue, are often used for rescue. Is it likely that there will be an efficient amount of boating and rescuing?
What will be an ideal response?
The unemployment rate equals the
a. number of employed persons divided by the number of unemployed persons. b. number of unemployed persons divided by the civilian non-institutional population. c. number of unemployed persons divided by the civilian labor force. d. sum of unemployed persons and discouraged workers divided by the civilian labor force.
On the basis of theory and empirical evidence, economists have reached several conclusions about economic growth. Which of the following is not one of these conclusions?
a. A relatively simple way to increase growth rates permanently is to increase a country's saving rate. b. Growth is generally inhibited rather than promoted by policies like protective tariffs. c. Well-established property rights that are enforced by fair and efficient courts are important to economic growth. d. Countries with few domestic natural resources still have opportunities for economic growth.
Which of the following statements is true?
A. Keynesians believe that consumers are inherently unstable in consumption decisions, but that businesses are relatively stable in making investment decisions. B. Monetarists believe in discretionary monetary policy. C. Lowering tax rates is the main priority of Supply Side economists. D. Rational expectationists argue that businesses have a poor record of anticipating government fiscal policy.