Suppose we were analyzing the pound per Swiss franc foreign exchange market. If Switzerland's risk level rises relative to England and nothing else changes, then
a. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market rises, causing an appreciation of the Swiss franc.
b. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market falls, causing an uncertain change in the value of the Swiss franc.
c. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate.
d. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing a depreciation of the Swiss franc.
e. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market rises, causing an uncertain change in the value of the Swiss franc.1.The balance of payments:
a. Includes exactly the same transactions that are included in the foreign exchange market.
b. Is the sum of all financial payments between residents of one nation and residents of the rest of the world.
c. Is a flow concept.
d. All the above.
.C
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The percentage change in one's real income can be approximated by the percentage change in
A. price level minus the percentage change in nominal income. B. nominal income minus the percentage change in the price level. C. nominal income divided by the percentage change in price level. D. price level divided by the percentage change in nominal income.
The aggregate demand curve is downward sloping because increases in the price level affect people's real wealth, their lending and borrowing activity, and the nation's trade with other nations in such a way that the quantities demanded for the goods and services produced in the economy decrease
Indicate whether the statement is true or false
When small changes in price lead to infinite changes in quantity demanded, demand is perfectly
a. elastic, and the demand curve will be horizontal. b. inelastic, and the demand curve will be horizontal. c. elastic, and the demand curve will be vertical. d. inelastic, and the demand curve will be vertical.
If the unemployment rate rises, which policies would both be appropriate to reduce it?
a. increase taxes, increase government spending b. increase taxes, decrease government spending c. decrease taxes, increase government spending d. decrease taxes, decrease government spending