Describe the automatic stabilizers that are lost to a country that fixes its exchange rate to another currency.
What will be an ideal response?
If a country is experiencing an economic slowdown and has a floating exchange rate, the monetary policymakers are likely to lower interest rates to stimulate domestic investment and consumption spending. In addition, the lower interest rates are likely to reduce the demand for domestic financial assets, which reduces the demand for the country's currency, causing its currency to depreciate relative to the currency of other countries. The depreciated currency will increase the demand for the nation's export goods and reduce imports, causing net exports to increase. With a fixed exchange rate, this stabilizing mechanism is lost.
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If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market?
A) There will be a decrease in the supply of dollars. B) The dollar will depreciate. C) The dollar will appreciate. D) There will be a decrease in the demand for dollars.
Helen's Honey Hut supplies 20 jars of honey per week when the price of honey is $6 per jar and supplies 30 jars per week when the price of is $8 per jar, so the price elasticity of supply over this price range is 1.4
a. True b. False Indicate whether the statement is true or false
Which of the following examples shows the problem of using physical units as the measure of total economic activity?
a. Milk is measured by gallons; milk is paid for with dollars. b. Milk is measured by gallons; train travel is measured by miles. c. A gallon of milk weighs more than a gallon of water. d. A plane covers more mph than a train does.
A perfect monopoly:
A. restricts output to maximize profits. B. has no competition at all. C. has complete market control. D. All of these statements are true.