Describe the type of international monetary system that is currently in use. What advantages do proponents of this type of system cite in support of its use? What disadvantages do its opponents cite?
The international monetary system currently in use is described as a managed flexible exchange rate system, or managed float. This is primarily a flexible system where the forces of supply and demand for the currencies determine the exchange rates. However, nations do periodically intervene in the foreign exchange market to adjust exchange rates. Proponents of the managed flexible exchange rate system believe that it allows nations to pursue independent monetary policies, that it solves trade problems without trade restrictions, and that its flexibility allows for easy adjustment to shocks. Opponents of this type of system believe that it promotes exchange rate volatility and uncertainty, that it promotes inflation and that it corrects trade deficits a long time after a depreciation in the currency.
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A firm experiencing constant economies of scale will have a long-run average cost curve that is:
a. upward sloping b. vertical c. downward sloping d. horizontal
To justify restricting trade, the less-developed countries have more reason to use this argument than industrially advanced countries
a. retaliation b. national security c. cheap foreign labor d. infant industries e. unionized foreign labor
The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal:
A. the more elastic the demand for the product, the less elastic the demand for labor. B. the more elastic the demand for the product, the more elastic the demand for labor. C. the elasticity of product demand only affects the elasticity of labor demand when the product market is purely competitive. D. if product demand is perfectly elastic, labor demand will be perfectly inelastic.
When a market clearing price is determined
A) the exchange between buyers and sellers is voluntary. B) the exchange between buyers and sellers is directed by outside factors such as the government. C) the exchange between buyers and sellers benefits only the buyers. D) the exchange between buyers and sellers benefits only the sellers.