Which of the following problems will most likely occur with a system of flexible exchange rates?
A. Macroeconomic instability as exports and imports fluctuate with the exchange rates.
B. Government favoritism toward selected importers of goods and services.
C. The emergence of black markets for foreign currency.
D. Distortions in trade patterns away from the pattern suggested by comparative advantage.
A. Macroeconomic instability as exports and imports fluctuate with the exchange rates.
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If a nation protects an industry because it believes that there are positive externalities in the production process, it is asserting that the free market will
A) produce less than is optimal from society's point of view. B) produce more than is optimal from society's point of view. C) produce the correct amount but charge too high a price. D) produce the correct amount but charge too low a price.
When inflation rises, the nominal interest rate
a. rises, and people desire to hold more money. b. rises, and people desire to hold less money. c. falls, and people desire to hold more money. d. falls, and people desire to hold less money