A country's nominal exchange rate, e, is defined as the number of units of:
A. the domestic currency that one unit of the foreign currency will buy.
B. the foreign currency that one unit of the domestic currency will buy.
C. domestic goods relative to the number of units of foreign goods.
D. foreign goods relative to the number of units of domestic goods.
Answer: B
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When the price of peaches went up, people bought fewer peaches and more strawberries. This is an indication that tastes have changed as a result of the price increase.
Answer the following statement true (T) or false (F)
You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce
A) the quantity of money by $1,600. B) deposits by $1,600. C) the quantity of money by $2,000. D) deposits by $2,000.
Refer to Figure 19-7. If the Indian government pegs its currency to the dollar at a value below $.02/rupee, we would say the currency is
A) parity valued. B) overvalued. C) undervalued. D) equilibrium valued.
One way the government can boost the economy out of a recession is:
A. with public announcements telling the public to save their money. B. by increasing government spending. C. by setting price ceilings on most goods so people can afford them. D. None of these will help an economy in recession.