Explain what is meant by a devaluation of a currency. Under what circumstances would a country devalue its currency?
What will be an ideal response?
In a fixed exchange rate system, a country faces a balance of payments deficit when the supply of its currency exceeds the demand at the fixed exchange rate. The country can lower the value at which the currency is pegged to increase its net exports; this is called a devaluation.
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Which of the following statements is (are) correct? In the classical system,
a. aggregate demand is the primary determinate of the natural rate of output and employment. b. both output and employment are self-adjusting towards the natural rates of output and employment. c. changes in aggregate supply drives changes in output in the short-run and in the long-run. d. only output is self-adjusting to the supply-determined full-employment levels.
According to the graph shown, the monopolistically competitive firm will produce:
These are the cost and revenue curves associated with a monopolistically competitive firm.
A. where MR = MC and will charge according to ATC.
B. where MR = MC and will charge according to D.
C. where D = MC and will charge according to MR.
D. where D = MC and will charge according to ATC.
Which of the following perspectives exerted the most impact on fiscal policy during the Great Depression?
a. the Keynesian view b. the supply-side view c. the view that the federal government should maintain a balanced budget d. the new classical view that fiscal policy exerts little impact on demand and output
Natural disasters often cause shortages of critical supplies. What outcomes would neoclassical and behavioral economics typically predict from these events?
A. Both would expect prices to rise significantly, whether from market forces or from self- interest overwhelming any sense of compassion for others. B. Both would expect sellers to keep prices unchanged, whether to keep customers happy long-term or out of a sense of fairness. C. Neoclassical economists would expect economic chaos and collapse, while behavioral economists would expect everyone to act cooperatively. D. Neoclassical economists would expect prices to rise dramatically as a natural result of the greater scarcity, and behavioral economists would expect prices to increase less or not at all as people try not to take advantage of the situation.