In the coordination failure model, increasing returns to scale are best explained by strategic
A) mismanagement.
B) complementarities.
C) substitutabilities.
D) collusion.
B
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An example of an aggregate supply shock is
A. inflation caused by a surge in demand. B. the reduction of oil supply by the OPEC nations in the early 1970s. C. the increase in ice-cream sales every summer. D. the decrease in the labor force due to the baby-boomer generation reaching working age.
Currency traders expect the value of the dollar to rise. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?
A) Demand for dollars will decrease, and supply of dollars will increase. B) Demand for dollars will decrease, and supply of dollars will decrease. C) Demand for dollars will increase, and supply of dollars will increase. D) Demand for dollars will increase, and supply of dollars will decrease.
In general, the MRP _____ as output increases.
A. declines B. rises C. stays the same
The demand for the Franconian franc in the foreign exchange market equals 14,000 - 3,000e and the supply of francs in the foreign exchange market equals 2,000 + 2,000e, where e is the nominal exchange rate expressed in U.S. dollars per franc. If the franc is fixed at 3 U.S. dollars per franc, then to maintain this fixed rate Franconia's international reserves must:
A. decrease by 3,000 francs per period. B. decrease by 9,000 francs per period. C. increase by 9,000 francs per period. D. increase by 3,000 francs per period.