Explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates. See also Chapter 19
What will be an ideal response?
Using the GG-LL framework will help solve this question. The oil price shock of 1973 pushes the LL curve upward and to the right. Thus, the level of economic integration at which it becomes worthwhile to join the currency rises. In general, increase variability in the product markets makes countries less willing to enter fixed exchange rate areas. This prediction helps explain why the oil price shocks after 1973 made countries unwilling to revive the Bretton Woods system of fixed exchange rates.
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When a tax is imposed on a good or service, buyers respond only to the price that ________ the tax, and sellers respond to the price that ________ the tax
A) excludes; includes B) includes; excludes C) excludes; excludes D) includes; includes
A horizontal demand curve is perfectly elastic because a change in price will not induce a change in quantity demanded.
Answer the following statement true (T) or false (F)
Experience with patents in the pharmaceutical industry shows that when patents on drugs expire
A) prices remain high without patent protection because of a lack of competition. Firms that are not granted patents cannot compete with firms that are granted patents. B) other firms are free to produce chemically identical drugs. Competition reduces the profits that had been earned by the firms that received patents. C) most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs. D) firms will find ways to obtain additional patent protection—often by making cosmetic changes in drugs that were patented—so that they can continue charging high prices.
Positive spending shocks lead to ________ inflation ________
A) higher; in both the short and long runs B) higher; in the short run but not in the long run C) lower; in both the short and long runs D) lower; in the short run but not in the long run