Under a managed float, if U.S. demand for British goods drops, which of the following actions would the Bank of England need to take in order to stop any movement in the dollar-pound exchange rate?
a. Buy British pounds for dollars in order to shift the demand curve for pounds leftward
b. Sell British pounds for dollars in order to shift the supply curve for pounds leftward
c. Sell British pounds for dollars in order to shift the supply curve for pounds rightward
d. Buy British pounds for dollars in order to shift the demand curve for pounds rightward
e. Do nothing, since purchasing power parity will correct the situation in the short run.
D
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An austerity policy is
A) an increase in the money supply. B) an expenditure reduction and expenditure switching policy. C) an expansionary fiscal policy accompanied by decreases in taxes, increases in expenditures, or both. D) an exchange rate switching policy from a fixed to a flexible exchange rate system. E) None of the above.
Consider the accompanying payoff matrix.
The dominant strategy for Row Resorts is to ________ , and the dominant strategy for Column Cruises is to ________ .
A. offer reduced rates; keep rates high B. keep rates high; offer reduced rates C. keep rates high; keep rates high D. offer reduced rates; offer reduced rates
The diamond-water paradox occurs because:
A. the price of a product is related to its total utility, not its marginal utility. B. the price of a product is related to its marginal utility, not its total utility. C. water is, in fact, very scarce in certain regions of the world. D. diamonds are more useful than water.
Which of the following is a problem that arises when trying to classify regional trade agreements?
A) Many agreements combine elements from different categories. B) The definition of free trade area includes that of a customs union. C) Some agreements include cultural issues while others do not. D) The most favored nation clause includes all of them.