If Japan seeks to control its exchange rates so that ¥100 = $1, which of the following policies should it NOT maintain?
a. interest rates that provide the same return as alternative international rates
b. a stable rate of price level changes that will not cause currency depreciation or appreciation
c. a willingness to raise interest rates when its currency begins to depreciate
d. a willingness to raise price levels
Ans: d. a willingness to raise price levels
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How does an increase in the real exchange rate affect exports and imports?
A) Exports increase; imports decrease. B) Exports decrease; imports increase. C) Exports increase; imports change ambiguously. D) Exports change ambiguously; imports decrease. E) Exports increase; imports are constant.
Dry cleaning of clothing produces air pollutants. Therefore, in the market for dry cleaning services, the equilibrium price
A) and output are too low to be optimal. B) and output are too high to be optimal. C) is too low to be optimal, and equilibrium quantity is too high. D) is too high to be optimal, and equilibrium quantity is too low. E) is optimal, but there is an excess supply.
Which of the following is true of economic fluctuations? a. They can be experienced by the world economy as well as by a single nation
b. They tend to be equal in length and intensity. c. They reflect an economy's socio-political condition. d. They tend to become more severe when the government attempts to stabilize an economy. e. They have been completely offset by appropriate government policies during the last 40 years.
In a large country case, an optimal tariff is one for which the terms-of-trade gain exceeds the:
a. producer surplus. b. increased price of the product imported. c. deadweight loss. d. consumer surplus.