Refer to Figure 19-1. Which of the following would cause the change depicted in the figure above?
A) European productivity rises relative to American productivity.
B) The U.S. removes a quota on wristwatches from the European Union.
C) Americans increase their preferences for goods produced in the EU relative to American goods.
D) The price level of goods produced in the EU increases relative to the price level of goods produced in the United States.
D
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What alternative to restrictions on capital inflows do some economists recommend to minimize the possibility of increased lending booms and risk taking by domestic banks?
What will be an ideal response?
Which of the following explains why the demand for money curve has an inverse relationship between the interest rates and the quantity of money demanded?
a. As the interest rate rises, the opportunity cost of holding money rises, and people respond by converting cash or checking account balances into interest-bearing financial investments. b. As the interest rate rises, people find it advantageous to borrow money, which increases the quantity of money demanded. c. As the interest rate falls, the opportunity cost of holding money rises, and people respond by converting cash or checking account balances into interest-bearing financial investments. d. As the interest rate rises, the demand for money curve shifts outward to the right.
The opportunity cost of holding money is
a. the dollar cost necessary to change other assets into money b. the time cost of accessing funds c. the value of the goods and services a person is able to obtain with the money d. the interest a person could have earned by holding other forms of wealth instead e. zero, because opportunity costs only apply to real assets, goods and services
Classical economists believe that
a. velocity varies directly with the money supply b. changes in the money supply affect real GDP c. the quantity of money explains prices d. the money supply affects velocity e. there are three motives involved in the demand for money