Explain how a country with a current account deficit is a ripe candidate for currency devaluation
What will be an ideal response?
If, for example, Great Britain had a current account deficit, the holders of pounds would become nervous and shift their wealth into other currencies. In order hold the pound's exchange rate against the dollar pegged, the Bank of England would have to buy pounds and supply the foreign assets that market participants wished to hold. This resulting loss in foreign reserves, if large enough, would most likely force a devaluation by leaving the Bank of England without enough reserves to prop up the exchange rate.
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In the figure above, what happens if the Fed increases the quantity of money by 8 percent?
A) The interest rate rises to 1.08. B) The value of money rises to 1.08. C) The value of money falls to 0.92 and there is a movement downward along the LRMD. D) The LRMD curve shifts rightward to restore equilibrium. E) The price level falls to 1.08.
Vic derives less satisfaction from each additional cup of coffee he drinks. Therefore, he will buy added cups of coffee only if ______.
a. the quantity is increased b. the price is reduced c. the quantity is reduced d. the price is increased
In order for society to have a rising standard of living, output must grow: a. at a slower rate than the labor force. b. at the same rate as the population. c. faster than the population
d. at a slower rate than the population. e. at a slower rate than infrastructure.
Which of the following is necessarily a problem with antitrust laws?
a. They may target a business whose practices appear to be anti-competitive but in fact have legitimate purposes. b. They may encourage firms to collude and reduce social welfare compared to the unregulated market. c. They reduce the effectiveness of the market to self-regulate. d. They are enforced by agencies whose self-interest contradicts the interests of society as a whole.