Macland is running a budget deficit and has issued new treasury bonds. Foreign investors are eager to buy the newly issued bonds but to do so must have Macland currency. What effect does this budget deficit have on the value of Macland’s currency?
a. The exchange rate will not change.
b. The exchange rate will depreciate.
c. The exchange rate will appreciate.
d. The exchange rate will decrease.
c. The exchange rate will appreciate.
You might also like to view...
Explain and show graphically the effect of an increase in the expected inflation rate on the equilibrium exchange rate, everything else held constant
What will be an ideal response?
Which of the following statement(s) best describes trade-offs?
a. The trade-offs in many production possibilities frontiers are represented by a straight line because the law of diminishing returns holds that as resources are added to an area, the marginal gains tend to diminish. b. The trade-offs in many production possibilities frontiers are represented by a curved line because the law of diminishing returns holds that as resources are added to an area, the marginal gains tend to increase. c. The trade-offs in many production possibilities frontiers are represented by a straight line because the law of diminishing returns holds that as resources are added to an area, the marginal gains tend to increase. d. The trade-offs in many production possibilities frontiers are represented by a curved line because the law of diminishing returns holds that as resources are added to an area, the marginal gains tend to diminish.
The most glaring economic problem in the former Soviet Union was
A. a shortage of military goods. B. a surplus of military goods. C. a shortage of civilian goods. D. a surplus of civilian goods.
If international trade is based on product differentiation, for a country the basis for
A. importing is that the price of the imports is the same as the price of the domestic products. B. exporting is the domestic production of unique models or varieties demanded by some consumers in foreign markets. C. exporting is that domestic producers can charge a much higher price in the international market. D. importing is that foreign firms usually enjoy external scale economies.