If the central banks of most countries do not set the exchange rates, why do they hold foreign exchange as one of their assets?
What will be an ideal response?
Central banks hold foreign exchange reserves for those rare instances when the central bank intervenes in the foreign exchange market. The instances of intervention are rare, especially for the Federal Reserve.
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Why is the equilibrium price the best deal available for both buyers and sellers?
What will be an ideal response?
The baby boomer generation is just starting to retire, and waiting lists to get into nursing homes are on the rise. We could reasonably expect the demand for geriatric care to:
A. increase due to the number of buyers increasing. B. decrease due to the number of buyers increasing. C. increase due to expectations of future prices. D. decrease due to expectations of future prices.
Which of the following helps explain why the aggregate quantity demanded of goods and services is inversely related to prices within the framework of the AD/AS model?
a. As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services. b. As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the quantity of goods and services purchased. c. As prices fall, the government will have to reduce taxes, which will lead to an increase in the quantity of goods and services purchased. d. As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services.
Distinguish between invention and innovation.
What will be an ideal response?