Why do countries peg their currencies, and what problems can result from pegging?
What will be an ideal response?
Countries peg their currencies to make planning easier for their firms with extensive trade with another country, to aid their firms that have borrowed foreign investment funds denominated in other currencies, and to prevent inflation that would result from a decline in the value of their currency. Countries that peg can find that their currencies become either overvalued or undervalued relative to the equilibrium exchange rate.
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Derive the Black-Scholes formula to represent the relationship between the price of an option and the price of its underlying stock
Which of the following terms refers to the time it takes to determine that a recession has occurred?
a. recognition lag b. implementation lag c. legislative lag d. budgetary lag
Which of the following indicates the primary mechanism by which the money supply expands?
a. The U.S. Treasury prints additional currency. b. The Fed purchases additional bonds, which increases the reserves available to the banking system. c. The public decides to hold more currency rather than checking deposits. d. The U.S. government purchases additional gold.
Elinor Ostrom won the 2009 Nobel Prize in economics for her research showing:
A. government provision of public goods is the most efficient solution to the tragedy of the commons problem. B. social norms can sometimes be powerful enough for commonly held property to be managed extremely well. C. that privatization of public goods is the most effective solution to market failure associated with commonly held property. D. social norms are not an effective solution for the management of commonly held property.