During the latter 1990s and into the early 2000s, the U.S. stock market boomed reflecting rapid growth in the U.S. economy. In terms of demand for and supply of dollars, explain what possible impacts this rapid increase in stock market values could have on the exchange rate.
What will be an ideal response?
The increase in U.S. stock values could have the following impacts: if U.S. stock prices were rising faster on a percentage basis than foreign assets, many foreign investors would be attracted to the U.S. assets and the demand for dollars would increase. At the same time, increases in the wealth of Americans would result in an increase in the supply of dollars on the foreign exchange market. This increase in supply would tend to cause the dollar to depreciate, while the increase in demand would tend to cause the dollar to appreciate. The net effect will be determined by which increase was larger.
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Jill Johnson owns a pizzeria. She currently produces 10,000 pizzas per month at a total cost of $500. If she produced one more pizza her total cost rises to $500.11. What does this tell us about Jill's marginal cost of producing pizzas?
A) The marginal cost of producing pizzas cannot be determined without more information. B) The marginal cost of producing pizzas is rising. C) The marginal cost of producing pizzas is constant. D) The marginal cost of producing pizzas is falling.
If the quantity of goods and services produced in the economy decreases,
A) real GDP would certainly increase. B) nominal GDP would certainly increase. C) it may be possible for nominal GDP to increase. D) it may be possible for real GDP to increase.
Which of the following is not a reason for compensating wage differentials?
a. The risk involved in certain jobs b. An excess supply of workers in some industries c. A high probability of staying away from home d. To attract more laborers in risky professions e. Unpleasant working consditions
If interest rates in the U.S. are higher than elsewhere, it will cause
a. the demand for dollars to decrease b. the supply of dollars to increase c. the exchange value of the dollar in relation to other currencies to fall d. the dollar to depreciate e. the demand for dollars to increase