Flexible exchange rates occur when
A. speculators bet that a currency will soon depreciate.
B. exchange rates are determined by forces of supply and demand.
C. governments and central banks spend foreign exchange to prop an exchange rate at a certain level.
D. no one knows the true value of a currency.
Answer: B
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Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. If Alice produces 5,000 cubic yards per year, what is Kate's inverse demand function?
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