Suppose an "emerging market" economy becomes attractive to foreign investors. What are the likely consequences for the economy's currency and, thus, the macroeconomy?
What will be an ideal response?
High demand for the economy's assets causes high demand for the economy's currency, causing it to appreciate. Nominal appreciation reduces net exports and lowers inflation. An autonomous easing of monetary policy can increase aggregate demand, but the decrease in the real interest rate will not necessarily dampen enthusiasm for the country's assets.
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"The rigid link between monetary growth and inflation . . . had been broken." M1 grew faster in the deflationary 1980s than in the inflationary 1970s. Why?
A) The demand for money increased, reducing spending. B) The demand for money decreased, due to financial deregulation. C) The demand for money increased, as did velocity. D) The demand for money decreased and the Fed targeted the money supply.
A demand curve represents a(n)
A. direct relationship between price and demand. B. indirect or inverse relationship between price and supply. C. indirect or inverse relationship between price and quantity demanded. D. direct relationship between price and quantity demanded.
The price elasticity of demand for beef is estimated to be 0.60 (in absolute value). This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to
A) decrease by 12 percent. B) decrease by 26 percent. C) decrease by 32 percent. D) decrease by 60 percent.
Related to the Economics in Practice on page 360: Suppose you see the following advertisement for a vacation rental. "Beautiful condo on the Island of Maui (Hawaii). Sleeps 5. Great landscaped grounds, pool, and BBQ area. Lanai overlooks pool. $1,500 per week." It is likely true that the condo
A. doesn't have a view of the pool. B. has an actual rental rate of $1600 per week. C. is not on the island of Maui. D. has no view other than the pool (i.e. no ocean, mountain, or city view).