If purchasing-power parity holds but then U.S. prices rise, which of the following move the exchange rate back towards purchasing-power parity?
a. foreign prices rise or the U.S. nominal exchange rate rises
b. foreign prices rise or the U.S. nominal exchange rate falls
c. foreign prices fall or the U.S. nominal exchange rate rises
d. foreign prices fall or the U.S. nominal exchange rate falls
b
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Suppose that firms are located in a circle on an island. You are given transportation costs, fixed costs, variable costs, and demand (assume that customers are spread evenly along the circle). As the number of customers increase,
A. the number of firms will rise in the long run. B. the number of firms will stay the same in the long run. C. the number of firms will fall in the long run. D. It is impossible to tell from the information given
The exchange rate last month was $1= 1 Swiss francs. This month it is $1 = 1.15 Swiss francs. We can say that the value of the dollar
A. decreased, causing net exports to decrease and aggregate demand to fall. B. increased, causing net exports to decrease and aggregate demand to rise. C. increased, causing net exports to decrease and aggregate demand to fall. D. deccreased, causing net exports to increase and aggregate demand to rise.
The member countries under the EMS (European Monetary System) let their currencies float jointly among themselves, but maintained a fixed exchange rate against the rest of the world
Indicate whether the statement is true or false
The immediate objective of a nominal anchor is to reduce the variability of ________
A) monetary policy targets B) expected inflation C) aggregate demand D) central bank credibility