To maintain a pegged rate, a nation faces a trilemma and must also:
A) generate extra export revenues.
B) watch carefully to ensure imports and exports are equal.
C) adjust its interest rates and money supply to ensure the home interest rate is equal to the foreign interest rate to prevent pressure on the exchange rate.
D) restrict foreign capital inflows and domestic capital outflows.
Answer: C) adjust its interest rates and money supply to ensure the home interest rate is equal to the foreign interest rate to prevent pressure on the exchange rate.
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The biggest disadvantage of a fixed exchange rate is the
A) increased probability of high inflation. B) tradeoff between supporting the exchange rate and adjusting the trade balance. C) tradeoff between supporting the exchange rate and maintaining economic growth. D) increased probability of a trade deficit. E) tradeoff between supporting the exchange rate and maintaining a balanced budget.
Which of the following would be illegal according to the Robinson-Patman Act
a. "Party Packers" getting 10cents off every pack of ribbon they buy after 1000 units b. "Sideline Superstore" receiving 50 cents off a crate of strawberries since it buys from many other suppliers c. "Sam's Sandwiches" receiving 5 cents off per pound of cheese, since they are closer to the warehouse of the supplier d. None of the above
A firm could not be engaged in successful predatory pricing if: a. It charged prices greater than the average variable cost of production. b. It drove rivals out of the market
c. It raised its prices after its price cutting campaign. d. None of the above is true.
If on average, a dollar is spent 4 times each year to purchase real output, the velocity of money is:
A. four. B. one-fourth. C. the money supply divided by 4. D. nominal GDP divided by four.