(a) What happens to the fundamental value of a country's exchange rate when it raises its money supply in a fixed exchange-rate system?
Does this make the currency overvalued or undervalued if originally the official rate equaled the fundamental value?
(b) What happens to the fundamental value of a country's exchange rate when the foreign country raises its money supply? Does this make the currency overvalued or undervalued if originally the official rate equaled the fundamental value?
(c) So, if a country wants to maintain its official rate equal to its fundamental value, what must it do when the foreign country raises its money supply? What happens to inflation?
(a) Fundamental value falls below the official rate, so the currency is overvalued.
(b) Fundamental value increases above the official rate, so the currency is undervalued.
(c) The country must raise its money supply. This leads to inflation worldwide.
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When President Harry Truman said that he wanted to find a one-armed economist because his economic advisors always said, "On the one hand... and on the other hand... " he recognized that the advice of economists is often open to more than one interpretation. Why is this? a. Economists cannot make up their minds on policy matters
b. Economists agree with each other on all policy issues. c. Economists are aware that tradeoffs are involved in most policy questions. d. Economists are often unable to identify the critical questions involved in policy issues.
The supply of loanable funds curve
a. is upward sloping b. is downward sloping c. is horizontal d. begins sloping upward, then levels off e. may slope either upward or downward, depending upon the interest rate
In what sense is capital accumulation costly to a society?
Which of the following statements is true?
A. Thanks to the popularity of deregulation in the 1960s, by the end of the decade the airlines were free to set their own prices and select their own routes. B. Before deregulation, the Interstate Commerce Commission sometimes forced truckers to take roundabout routes and to return with empty trucks from long hauls. C. Airfares have stayed about the same after deregulation as they were before deregulation took place. D. Deregulation in various industries that took place in the 1980s has been an unqualified success, except in the airlines industry.