At the original exchange rate an import quota
a. creates a surplus in the market for foreign-currency exchange, so the exchange rate rises.
b. creates a surplus in the market for foreign-currency exchange, so the exchange rate falls.
c. creates a shortage in the market for foreign-currency exchange, so the exchange rate rises.
d. creates a shortage in the market for foreign-currency exchange, so the exchange rate falls.
c
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In the income-expenditure model, the 45-degree line
A) shows total expenditures at various price levels. B) marks all equilibrium output levels. C) is also called the planned expenditures line. D) is the locus of all the points for which output equals expenditures.
Under purely flexible exchange rates,
A) there is no intervention by the domestic fiscal or monetary authorities to specifically target the nominal exchange rate. B) there is only occasional intervention by the domestic fiscal or monetary authorities to specifically target the nominal exchange rate. C) the domestic fiscal and monetary authorities retain considerable flexibility to prevent short-run variability in the nominal exchange rate. D) the domestic fiscal and monetary authorities retain considerable flexibility to prevent long-run variability in the nominal exchange rate.