If the prices in the United States rise faster than those in other countries,
A) the exchange rate rises.
B) the exchange rate falls.
C) then interest rate parity must not hold.
D) the interest rate in the United States falls.
B
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The effect of a tariff on a foreign monopolist is similar to a large nation imposing a tariff on a small nation. What is the implication for the welfare of the home nation?
a. Only very large tariffs bring any benefit to the home nation. b. No tariffs are the best policy; all tariffs have a deadweight net loss. c. Small tariffs can be beneficial, but only to a certain point. d. The foreign producer may actually raise prices to make the tariff impossible to impose.
The Federal Open Market Committee's "balance of risks" is an assessment of whether, in the future, its primary concern will be
A) higher exchange rates or higher unemployment. B) higher inflation or a stronger economy. C) higher inflation or a weaker economy. D) lower inflation or a stronger economy.