Describe the Bretton Woods exchange rate system and explain how it fell apart.
What will be an ideal response?
POSSIBLE RESPONSE: In the Bretton Woods exchange rate system, countries other than the United States pegged their currencies to the U.S. dollar, and the U.S. government was obligated to exchange, at a fixed price, U.S. dollars for gold with the central banks of other countries. As the United States ran overall payments deficits, foreign central banks began to accumulate more dollars than they wanted to hold. As they exchanged some dollars for gold, U.S. holdings of gold decreased. The United States resisted tightening policies, which could have reduced or reversed U.S. payments deficits. Instead, in 1971 the U.S. government suspended the exchange of gold for dollars and imposed a 10 percent tariff to force other countries to revalue their currencies. The system was patched back together late in 1971, but by early 1973 most major currencies had shifted to floating against the U.S. dollar.
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If the slope of an indifference curve between two goods decreases as we move from left to right (dropping all minus signs), we infer that the consumer
a. is less willing to trade away a good when he has a lot of it. b. is more willing to trade away a good when he has a lot of it. c. always tries to keep the percentage of his budget spent on each good constant. d. views one of the goods as inferior.
When each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy
a. falls. b. stays the same. c. rises. d. may fall, rise, or stay the same.
Which of the following would best explain why regulatory capture is a problem?
A. The regulations implemented tend to reduce the profitability of the regulated industry and reduce global competitiveness. B. Regulatory capture unduly increases the size and power of government, increasing costs for taxpayers. C. Individuals implementing the regulations lack expertise about the industry and therefore make poor regulatory choices. D. The regulations implemented serve the private interests of the regulated industry, rather than addressing social interests such as consumer safety and environmental protection.
The possession of monopoly power and the willful acquisition of that power is
A. defined by the Supreme Court as monopolization. B. not defined as monopolization until a statement about profits is included. C. not the definition of monopolization. D. defined in the Sherman Antitrust Act as monopolization.