Explain and show graphically the effect of a decrease in U.S. budget deficits that decrease U.S. interest rates on the demand and supply of U.S. dollars for euros
What will be an ideal response?
A decrease in U.S. interest rates would decrease the desire to invest in financial assets in the United States relative to the rest of the world. The demand for dollars would fall, causing the exchange rate for the dollar to fall. The lower exchange rate would increase net exports, leading to a smaller current account deficit.
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Adverse selection is a barrier to financing global growth because
A) of the differences between financing using loans, portfolio investment and foreign direct investment. B) if investors have trouble identifying high-risk firms they may be unwilling to lend funds to creditworthy firms. C) firms sometimes have trouble determining whether they need funds or not. D) there is the possibility that the funds are used for riskier behavior than the lender agreed to.
Which of the following is true, other things equal?
a. A reduction in prices will increase the real wealth of those holding a fixed quantity of money. b. A reduction in prices will lead to a decline in net exports. c. A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. d. A reduction in prices will increase profit margins and, thereby, stimulate additional investment.
Comparing the US to other countries ranked by inequality,
a. the US has a less equal distribution of income than some countries, but a more equal distribution of income than others. b. the US has one of the most equal distributions of income. c. the US has one of the least equal distributions of income. d. the US has a more equal distribution of income than other economically advanced countries such as Japan, Germany, and France.
Government polices aimed at changing the underlying structure or institutions of the nation's economy are called:
A. fiscal policy. B. structural policy. C. trade policy. D. monetary policy.