Please draw a figure illustrating the actions the central bank must take to maintain a fixed exchange rate following an increase in output
What will be an ideal response?
A rise in output from to will increase the real money demand, so the central bank must purchase foreign assets and raise the money supply from to , in order to maintain a fixed exchange rate .
You might also like to view...
The key difference between the real exchange rate and the market exchange rate is that the market exchange rate controls for the level of prices
Indicate whether the statement is true or false
The above figure shows the market for apples. If a consumer group convinces the government to set a maximum price of $2 per pound, then
A) 300 pounds of apples will be sold at $2. B) no apples will be supplied. C) no apples will be demanded. D) there will be a shortage of 100 pounds of apples.
A production possibilities frontier is a straight line when
a. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. b. an economy is interdependent and engaged in trade instead of self-sufficient. c. the rate of tradeoff between the two goods being produced is constant. d. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.
Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie. Each has in mind a maximum amount that he will bid. This maximum is called
a. a resistance price. b. willingness to pay. c. consumer surplus. d. producer surplus.