Flexible exchange rates occur when
A) speculators bet that a currency will soon depreciate.
B) governments and central banks spend foreign exchange to prop an exchange rate at a certain level.
C) no one knows the true value of a currency.
D) exchange rates are determined by forces of supply and demand.
Answer: D
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In the above table, saving must be
A) -$300 billion. B) $300 billion. C) $400 billion. D) -$400 billion.
If price discrimination occurs in a market
A) consumers whose demand for the product sold is more elastic pay higher prices than consumers whose demand is less elastic. B) the firm earns arbitrage profits. C) the marginal cost of production is constant. D) the law of one price does not hold.
Along an LM curve at higher income levels the transactions demand for money is __________, so the interest rate must be __________ to equate the demand to the fixed supply of money
A) higher; higher B) higher; lower C) lower; higher D) lower; lower
Given that most investors tend to be risk averse,
A) no one buys risky assets. B) there's a trade-off between risk and return. C) low risk assets provide the best return. D) it must be a superior strategy compared to one that is risk loving.