Under the current managed float exchange rate regime, countries with ________ in their balance of payments frequently do not want to see their currencies ________ because it makes their goods more expensive abroad and foreign goods cheaper in their
countries. A) surpluses; depreciate
B) deficits; depreciate
C) surpluses; appreciate
D) deficits; appreciate
C
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When consumers are less confident about their jobs or incomes, they are more likely to
A) reduce purchases of durable goods than nondurable goods. B) increase consumption spending and decrease investment spending. C) reduce purchases of nondurable goods and increase purchases of durable goods. D) increase investment spending and decrease consumption spending.
The deadweight loss from monopoly pricing is:
A. the amount by which aggregate surplus falls short of its minimum possible value, which is attained in a perfectly competitive market. B. the amount by which consumer surplus exceeds producer surplus. C. the amount by which aggregate surplus falls short of its maximum possible value, which is attained in a perfectly competitive market. D. the amount by which producer surplus exceeds consumer surplus.
Assume a two-country, two-commodity, two-input model. Let the countries in the model be the United States and the Rest of the World and the goods be steel and wheat. The two factors of production are capital and land. Further, the United States is capital-abundant and steel production is capital-intensive. Suppose, in the absence of trade, the United States operates at a point on its production-possibility curve where it produces and consumes twenty units of wheat and twenty units of steel. Once it engages in free trade, the international price of one unit of steel is two units of wheat. In response to the opening of trade, the United States moves along its production-possibility curve to a new point where it produces thirty units of steel and ten units of wheat. Is the United States
better off following the opening of trade? Provide a logical proof of your answer. What will be an ideal response?
Explain the concept of inefficiency in terms of a production possibilities curve.
What will be an ideal response?