Assuming the free flow of capital across borders, explain why a country that has a fixed exchange rate cannot have an independent monetary policy reaction curve.
What will be an ideal response?
We saw that a country that adopts a fixed exchange rate, for example fixing their currency to the U.S. dollar, then must adopt the monetary policy set by the FOMC. To ensure the stability of the exchange rate, the country will need to alter its real interest rate in line with FOMC changes. Over the long run, as inflation rates in the two countries converge, the monetary policy reaction function of the country should converge to that of the FOMC.
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A) 30 B) 20 C) 55 D) 40
The Mint Act of 1792, following the ideas of Thomas Jefferson and Robert Morris, set the U.S. up as
(a) a silver standard country. (b) a paper-money country. (c) a gold-standard country. (d) a bimetallic country.
There are at least ______ factors in addition to price that affect demand.
a. three b. four c. five d. two
Suppose two variables are directly related. If one variable rises, then the other variable:
a. remains unchanged. b. falls. c. also rises. d. reacts unpredictably.