A key assumption to ensure that domestic returns and foreign returns are in equilibrium is:

a. there are perfectly flexible prices.
b. the quantity of money is fixed.
c. there are no capital controls preventing the movement of capital.
d. trade is not subject to any restrictions.


Ans: c. there are no capital controls preventing the movement of capital.

Economics

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A gallon of milk costs $4 in Bonland. If the government fixes the price at $3.50, ________

A) the quantity demanded of milk will fall B) the quantity of milk supplied will increase C) a shortage of milk will occur in the market D) there will be an excess supply of milk in the market

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If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy

Indicate whether the statement is true or false

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The ABC Corporation is contemplating purchasing a new computer system that would yield a before-tax return of 30 percent. The system would depreciate at a rate of 3 percent per year. The after-tax interest rate is 11 percent, the corporation tax rate is 35 percent, and a typical shareholder of ABC has a marginal tax rate of 30 percent. Assume for simplicity that there are no depreciation allowances or investment tax credits. Do you expect ABC to buy the new computer system?

What will be an ideal response?

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CANOES-R-US makes canoes. It buys the shell of the canoe from another firm for $300 and uses its labor and intermediate goods to make the canoe. It sells the finished canoe to a retail canoe store for $800. The retail canoe store then sells the canoe to a consumer for $1,200.

A) $1,200. B) $800. C) $500. D) $400.

Economics