In the foreign exchange market, how does each of the following influences affect the demand for dollars and the demand curve for dollars?
a) an increase in the exchange rate.
b) an increase in the U.S. interest rate.
c) a fall in the expected future exchange rate.
a) The increase in the exchange rate decreases the quantity of dollars demanded and creates an upward movement along the demand curve for dollars.
b) An increase in the U.S. interest rate increases the demand for dollars and shifts the demand curve for dollars rightward.
c) A fall in the expected future exchange rate decreases the demand for dollars and shifts the demand curve for dollars leftward.
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When do insurance companies encounter the problem of moral hazard?
a. When simply having insurance causes people to take more risks than they would otherwise. b. When they do not have enough information to distinguish between people who are "good risks" and those who are "bad risks." c. When the price of insurance premiums fully reflects all available information. d. When the insurance company suffers large losses because a major catastrophe has affected a large number of people simultaneously.
Assuming money neutrality in the classical model, a 10% increase in the nominal money supply would cause
A) a 10% increase in the real money supply. B) a 10% decrease in the real money supply. C) no change in the real money supply. D) a less-than-10% change in the price level due to a shift in the aggregate supply curve.
The principle of comparative advantage essentially states that
A) there are some goods for which the opportunity costs of production are the same regardless of who produces them. B) some goods have high opportunity costs and low absolute costs. C) specialization can reduce output rather than increase it. D) total output of an economic system is greatest when each good is produced by those who have the lowest opportunity cost of producing the good.
Which of the following is included in GDP?
a. burglar alarm purchases b. crime c. traffic congestion d. income equality