Product _______ may create _______ trade between countries, particularly in those with similar relative factor endowments.
A) homogeneity; the absence of
B) differentiation; one-way
C) differentiation; two-way
D) liability; two-way
Ans: C) differentiation; two-way
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Assume that policy makers are pursuing a fixed exchange rate regime. Assume that the economy is initially operating at the natural level (i.e., Y = Yn). Suppose a reduction in wealth causes households to reduce consumption. This wealth-induced decrease in consumption will cause which of the following to occur?
A) The real exchange rate will be permanently higher in the medium run. B) The real exchange rate will be permanently lower in the medium run. C) The effects of this devaluation on the real exchange rate will be ambiguous in the medium run. D) The real exchange rate will be unchanged in the medium run.
The Federal Reserve
a. prints money for use by individuals during transactions. b. is a nation's monetary authority, responsible for controlling the money supply. c. issues government debt. d. makes loans and takes deposits from individuals. e. collects taxes from corporations only while the Treasury Department collects personal income and Social Security taxes.