Assume the demand function for good X can be written as Qd = 80 - 3Px + 2Py + 10I where Px = the price of X, Py = the price of good Y, and I = Consumer income. This equation implies that X and Y are substitutes
Indicate whether the statement is true or false
TRUE
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Which of the following statements is true of a flexible exchange rate system?
A) Market forces tend to undervalue a currency over time. B) Market forces tend to overvalue a currency over time. C) Market forces do not affect exchange rates between different currencies. D) Market forces tend to push the exchange rate of a currency to market clearing levels over time.
If you were a lender, which of the following unexpected changes in inflation would you prefer once you have issued a long term fixed rate loan?
a. An increase from 2% inflation to 6% inflation. b. An increase from 7% inflation to 10% inflation. c. A decrease from 14% inflation to 8% inflation. d. A decrease from 6% inflation to 3%.
An increase in the supply of U.S. dollars to the foreign exchange market could be caused by all of the following except
a. U.S. incomes rise b. U.S. interest rates fall c. U.S. consumers buy more imported cars d. U.S. incomes fall e. U.S. travelers take more trips to other countries
The European Union crisis was caused by:
a. Too little state spending b. The fact that all EU members are on the euro c. industrial planning d. excessive government spending by weak economies e. all of the above