Discuss the problems associated with the imposition of capital controls
What will be an ideal response?
First, with capital controls, domestic firms and investors must receive permission from the government to exchange domestic currency for foreign currency, leading to possible corruption. Second, multinational firms may be reluctant to invest in countries with capital controls because the firms will have difficulty returning any profits they earn to their home countries if they can't exchange domestic currency for foreign currency. Finally, in practice, many countries find that their capital controls are evaded by individuals and firms who resort to a black market where currency traders are willing to illegally exchange domestic currency for foreign currency.
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A federal budget deficit is financed by the
A. private sector's investment spending. B. government purchase of Treasury securities. C. government issuance or sale of Treasury securities. D. nation's exports.
When Ethan continues his education beyond high school, he is increasing his
A) human capital. B) capital. C) wage rate. D) rent. E) quantity of labor.
In a competitive market, profit can be considered a reward to businesses that
a. produce a good that consumers value more highly than its component resources. b. reduce the value of resources used as inputs in production. c. prohibit rival firms from entering the market and competing. d. control costs, rather than following the wishes of consumers when deciding what products to produce.
In the monetarist version of the AD-AS framework, starting from long-run equilibrium, a decrease in velocity produces
A) no change in Real GDP in the short run or the long run. B) a rise in Real GDP in both the short run and the long run. C) a fall in Real GDP in both the short run and the long run. D) a fall in Real GDP in the short run, but not in the long run. E) no change in Real GDP in the short run, but a rise in the long run.